| Cisco seen reporting solid second quarter |
 |
 |
 |
| Monday, 06 February 2012 17:21 |
|
(Reuters) – A year after network equipment maker Cisco Systems Inc unnerved investors with yet another weak quarterly outlook the company looks set to report a stable quarter buoyed in part by improving enterprise demand in the United States. Analysts on average expect Cisco to post earnings of 43 cents a share excluding items, up 16.2 percent, in the quarter that runs until end-January, on a revenue increase of almost 8 percent to $11.23 billion, according to Thomson Reuters I/B/E/S. For the current quarter analysts estimate earnings of 45 cents a share on revenue of $11.48 billion. Cisco is due to report its second quarter results after the bell on Wednesday, February 8. "We believe improving demand in the U.S. is driving a recovery in Cisco's business with solid growth across U.S. enterprise and commercial offsetting weakness in Europe and parts of Asia such as India," Natarajan Subrahmanyan, analyst at The Juda Group, wrote in a note. He added that "Cisco will outgrow its peers over the long-term, given enterprise networking is outgrowing overall IT spending." Investors have been trying to gauge what IT budgets will look like in 2012, with mixed messages from companies in the past two months, and will be keen to hear Cisco's take on the macroeconomic outlook. Some of Cisco's smaller rivals such as Juniper Networks, Tellabs and Acme Paket had warned of weak capex spending while F5Network said it sees a boost in enterprise demand, thanks to a boom in data center consolidation. Cisco, which is active in data centers as well, appeared to have also seen solid enterprise demand that "tempered downbeat carrier capex," Barclays said. According to Morgan Stanley analyst Ehud Gelblum, Cisco had also benefited from revenue from large routing contracts in China. In addition, Subrahmanyan said Cisco had been aggressive in pricing in the routing market, possibly resulting in some moderate gains in market share. Routers and switches, which direct Internet traffic, are core to Cisco's business but the company has also focused on data centers, enabling and providing cloud computing technology and video platforms. "We expect Cisco to report relatively in-line results and guidance, causing it to remain the safe haven it has become since late last summer," Gelblum said, but cautioned that some issues remained. While he expected Cisco to gradually lose share in the fixed line switching market where both Juniper and Hewlett-Packard Co remained aggressive, he anticipated that "Cisco can lose share gracefully and not miss numbers." Cisco would likely lose some market share to Juniper in the data center market as well, Gelblum said. (Reporting By Nicola Leske; Editing by Richard Chang) |