Cisco Q4 expectations rise with enterprise demand

Cisco Q4 expectations rise with enterprise demand

Summary: The consensus view for Cisco appears to be that macroeconomic conditions have improved and the company is grabbing share in the data center courtesy of its servers, switches and routers.

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Cisco Systems is expected to deliver strong fourth quarter results that highlight data center strength, pricing power and improved conditions for networking companies.

According to Thomson Reuters, Cisco is expected to report fourth quarter earnings Wednesday of 51 cents a share on revenue of $12.41 billion. As for the outlook, Wall Street is expecting first quarter earnings of 51 cents a share on earnings of $12.45 billion.

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The consensus view for Cisco appears to be that macroeconomic conditions have improved and the company is grabbing share in the data center courtesy of its servers, switches and routers. Meanwhile, Cisco has been able to hold gross margins of 62 percent or more over the last 10 quarters.

Cowen & Co. analyst Paul Silverstein noted that Cisco is benefiting from data center and cloud strength. He expects better demand in North America and improvements in EMEA. Silverstein also argued that Cisco can navigate the software defined networking trend.

Barclays analyst Ben Reitzes has also reported improving demand in the data center. He said:

We believe that Cisco remains a very solid long-term investment idea in enterprise IT – as it can leverage its position in networking to expand in the data center. Our checks for Cisco indicate stronger enterprise market in the US, some improvement in Federal and ongoing improvement in service provider (30% of sales). We also believe that sentiment around the SourceFire acquisition is improving with strong results and as revenue and competitive synergies become more apparent.

Sanjiv Wadhwani, an analyst at Stifel Nicolaus, said in a research note that Cisco is also seeing better demand among corporations. Wadhwani said:

Our checks show switches saw steady demand, with positive momentum on the Nexus and Catalyst 3850 side. Demand for faster speed ports are driving switch upgrades which has resulted in solid demand for 10G products. As a reminder, overall Cisco’s goal in switching is to maintain 50% port market share and 70% revenue share. UCS saw solid growth, with continued market share gains. Integrated solutions such as FlexPod with NetApp and Vblock through VCE are driving demand for UCS, which is becoming a preferred platform across all segments and geographies.

Add it up and things look fairly rosy for Cisco relative to previous quarters. As usual, Wall Street will hang on every economic outlook word from Cisco CEO John Chambers.

Topics: Networking, Cisco, Cloud, Data Centers

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