Cisco announced plans to cut 4,000 more jobs (5% of its global workforce); the sales forecast for the quarter came in surprisingly low.
Cisco CEO John Chambers said that while emerging markets grew by 8%, the big emerging markets only grew by 1%. Brazil and Russia were flat, and China was down 6%, causing greater inconsistent growth than in the past.
Meanwhile, Wal-Mart shares are down to $74.41 after its Q2 earnings fell short of Wall Street expectations. The retail giant cited abating international markets, as operating income grew 5.2% in the U.S. but dropped 1.3% internationally.
Cisco and Wal-Mart both pinned their bad performances on emerging market woes, but that's not the real story.
"With regard to the notion that emerging markets are causing this – I'm not so sure that's true," said Money Morning Chief Investment Strategist Keith Fitz-Gerald, a seasoned market analyst with decades of experience in global markets.
What Really Happened with WMT, CSCO
When it comes to Wal-Mart, Fitz-Gerald sees a different force at play:
"Wal-Mart missed by a penny. Blaming emerging markets is an overreaction. The bigger question in my mind is whether Wal-Mart screwed up and overextended itself – their management hasn't exactly been the best over the last two years. So, I'm less inclined to look critically at emerging markets, and more inclined to look at management issues."
Fitz-Gerald does identify one issue for Wal-Mart's international operations…but it applies to all retailers.
"Macy's missed, and Target will probably miss," Fitz-Gerald surmises. "I generally haven't been a fan of retailers for several years now, because I believe the global deleveraging process is going to be extreme. This is why I've recommended goods and services that are necessities to my Money Map Report subscribers."
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Similar to Wal-Mart, Fitz-Gerald is looking past emerging markets as the cause of Cisco's bad performance.
"Cisco's sales are, for the most part, long-cycle. I think consumers bought a lot during the downturn, and now they're off-cycle with regard to quarterly reporting and analyst expectations. Generally, that holds true for a lot of the large capital equipment companies right now"
And there could even be a third force at play to consider before swallowing headlines that point to emerging market woes: