Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Inline Skating For Cisco


Tech behemoth should post solid-but-cautious quarter.

I think we should expect the usual Cisco (CSCO) quarter: Not the usual recent quarter, where they offer a disappointing outlook, but the one where they meet or beat by the penny and guide inline, maybe sprinkled with a hint of, "We continue to execute well and expect to gain share during these tougher operating environments."

More specifically, as Juniper (JNPR) showed, network traffic on a global scale is still strong enough to justify purchases of the big boxes (core routers). I expect Cisco will exhibit strong core-router sales as well. I also think switching and storage enterprise numbers will continue to show solid results as well - Foundry (FDRY), for example, recently beat and raised numbers.

As with any current report, the guide is the key. The biggest issues for guidance will be consumer-driven areas; I expect these will be mixed to sluggish. However, I think they'll be good enough to keep Cisco from lowering guidance. In fact, while next quarter could be a bit of a coin toss, I'm looking for a better-than-expected incline into the fourth quarter of 2008 and the first couple of quarters in 2009.

As previously mentioned, we've seen beat-and-raise quarters from Juniper and Foundry; Netgear (NTGR) was also solid. This morning, we had 3Com (COMS) come out of nowhere, raising numbers for next quarter on routing sales into Huawei (China's largest networker).

Like Qualcomm (QCOM) a couple of weeks ago, Cisco's an easier longer term call, given the sheer number of positive catalysts on the horizon (video over IP, HD over IP, gaming, resurgent video conferencing, global carrier ISP traffic growth, smartphone bandwidth growth, etc.) - not to mention builds in China, India and other emerging economies. Essentially, whole industries are moving their product distribution network -- including media and advertising content -- to the Internet.

Bottom line: Cisco will be fine, possibly offering inline guidance containing a slightly improved (but still cautious), tone. This could be viewed as a sandbag issuance and provide some near-term upside. However, I'm not expecting a Qualcomm redux, since Qualcomm was boosted by the Nokia (NOK) settlement.

The longer term bullish call is much easier, as I said, especially given historically low valuation metrics on PSR, P/E, PEG and P/B. My fair value number on Cisco is around $28, and I think the shares could trade near $35 over the next 8 to 12 months.
< Previous
  • 1
Next >
Position in CSCO, JNPR

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos