Cisco ($CSCO)  continues to trend down with gaps in between.

Since my last post in May, CSCO has fail to hold on and has go lower towards the $15 range.

News is out now that CSCO will cut as many as up to 10,000.

CSCO job cuts highlight the possibility of slow growth ahead due to economic activities and its internal innovation/transformation.

I believe, CSCO will hit $12.50 by Q1, 2012 (or maybe even earlier).

Reuters just reported that Cisco (CSCO) will have a sales miss for this quarter with more jobs cuts expected.

The key points to note for Cisco is as follows:

1. Cisco’s core businesses is UNDER THREAT.

• On the low end, competitors comes in the form of Netgear (NTGR), despite the fact that it owns Linksys.
• On the high end, there’s Huawei from China.

In other words, there is very little room for growth in its traditional stronghold.

2. Transitional Period

Much has been said about its transition. While Cisco is pretty much cash rich, with little debt, there is no guaranteed that the transition will see light.

Just not too long ago, the newly acquired FLIP was dumped.

Traditionally, Cisco is used to selling hardware (routers, switches etc). The transition may mean more services and that does requires a change in approach.

3. Ichimoku Chart for CISCO (CSCO)

Nonetheless, we can see from the Ichimoku chart above, CSCO has at least 4 gap down May 2010 when it break the kumo support.

The trend is clearly bearish. With more cost cutting expected, I won’t be surprised if it can touch $15 or even $12 if the overall market turns bad.

However, CSCO chart is showing 2 possible trends at the same time.

From the chart, we can see the following :

1. As shown in the yellow highlighted area, there is a Tenkan sen – Kijun sen bullish cross on Feb 18 just below the kumo.

2. This signifies a weak bullish signal.

3. The price today is trading right at on top of the kumo and we can see that there is a resistance at 24.40

4. So, we could either bet that the bullish trend will continue or we can bet that it will not.

5. In my case, my bet is that it will not break 24.40 . This is further supported from the fact stochastic is showing overbought signals for CSCO.

6. Also, on the business front, Cisco will not be renewing their partnership with HP come this April. And HP was reported to be brining in US$1B business for CSCO. Somewhere, someone from CSCO needs to be able to fill this gap.

7. I don’t think Cisco transformation will be completed this year. It will take another 2-3 years before the entire company is aligned.

Maybe it is because the market is falling and little attention is paid to it. Another reason is the acquisition size is small. However, I think the significance is huge.

From Reuters:

Cisco Systems, Inc. Announces Agreement To Acquire DVN (Holdings) Limited Set Top Box Business
Monday, 2 Nov 2009 06:30pm EST

Cisco Systems, Inc. announced a definitive agreement to acquire the set top box business of DVN (Holdings) Limited. Listed in Hong Kong with major operations in China. Under the terms of the agreement, Cisco will pay up to $44.5 million for the set top box business of DVN. Of this amount, approximately $17.5 million will be paid upfront, with an additional maximum amount of $27 million to be paid over four years based on the achievement of specific sales milestones. The acquisition is expected to close in the first half of calendar year 2010. In addition to the acquisition, Cisco has entered into a go to market alliance with the remainder of the DVN organization which will continue to be led by current DVN CEO Terry Lui in order to utilize the company’s middleware and advanced applications as well as integration and support services. The alliance will provide joint customers with unparalleled end to end capabilities through the evolution from basic digital broadcast to advanced interactive services.