Cisco's first quarter: Switches, data center spending under microscope

Cisco's first quarter: Switches, data center spending under microscope

Summary: Cisco's fiscal first quarter is likely to be mixed, but the company is on the right track.

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Cisco Systems is expected to deliver a mixed first quarter with data center momentum offset core routing weakness.

The outlook for Cisco's first quarter is muted, according to various Wall Street analysts. Cisco is expected to report earnings of 39 cents a share on revenue of $11.03 billion. Analysts expect Cisco to hit its targets for the first and second quarters, but fail to wow investors.

Here are a few key items to watch:

  • Networking demand. Campus networking and carrier routing is expected to be below seasonal trends due to the economy and capital spending cuts, said Deutsche Bank analyst Brian Modoff. "Our checks suggest a mixed October, with datacenter (Unified Computing System and Nexus 5,000/7,000) performing above target, offset by some weakness in campus networking and in edge and core routing," said Modoff.
  • Pricing. In recent quarters, Cisco has been squeezed by rivals Juniper and HP. However, Stifel Nicolaus analyst Sanjiv Wadhwani said pricing seems to have firmed up. "While we do not know the exact reason for the improvement, they could be related to HP's internal issues and might be temporary in nature," said Wadhwani.
  • Competitive routing wins. Wadhwani also indicated that Cisco is gaining share from Juniper for core and edge network routers.
  • The fiscal 2012 and 2013 outlook. 10GB Ethernet switching is expected to drive revenue growth for the rest of the year. These switches are likely to ride shotgun with new chips from Intel and VMware VSphere 5 upgrades. In addition, carriers are going to invest in LTE and new routers. "Our forecast for moderate growth acceleration in 2013 is a function of stabilization for foundation product lines (routing and switching) and expansion in new products led by blade servers (Unified Computing System," said Matthew Robison, an analyst at Wunderlich.

Related:

Topics: Hardware, Cisco, Data Centers, Storage

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  • RE: Cisco's first quarter: Switches, data center spending under microscope

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