Cisco's fourth quarter: Strong results expected via data center boom
Analysts widely expect Cisco Systems to deliver a better-than-expected fourth quarter and provide a solid outlook for fiscal 2011.
After the closing bell Wednesday, Cisco is expected to show broad-based strength across its multiple businesses. The main point: Data center buildouts are expected to fuel Cisco as the company has a bevy of new products in the pipeline.
Wall Street is expecting Cisco to report earnings of 41 cents a share on revenue of $10.87 billion.
Wells Fargo analyst Jess Lubert said in a research note:
We think Cisco benefited from broad based strength across product groups and geographies, with data center projects a continued area of strength. Cisco should also benefit from the ramp of new products (Nexus, ASR, UCS, and ISR to name a few) and significant latent demand.
Jefferies analyst Adam Benjamin said Cisco's purchase commitments are likely to rise again. "Purchase commitments reflect an insight into Cisco's view of future demand, and we believe an increase to component ordering bodes well for its expectation of end demand," he said.
Among the key items to watch for Cisco:
- The outlook for IT spending. Cisco is expected to gain from a moderate IT spending recovery. This spending uptick is fueling gains for Cisco's Unified Computing and video conferencing efforts.
- Router and switch sales. Analysts such as Wedbush's Rohit Chopra say that telecom carriers are building out their wireless networks and that's helping Cisco. In the enterprise, Cisco has been discounting its new switches to gain share on Juniper, Brocade and HP.
- The supply chain picture. Cisco in recent quarters has wrestled with component shortages. However, indicators from Flextronics, TTM Technologies and Jabil all indicate that Cisco is meeting heavy demand for its wares.
- In addition, all of Cisco's peers have reported strong estimates. Networking, enterprise and telecom equipment providers generally reported strong results.
Also see: Cisco topic center