Cisco's Q4 enterprise sales likely solid, say analysts

Cisco's enterprise sales are expected to be strong with weakness in collaboration and mixed switch results.

Cisco's enterprise business is expected to deliver better than expected results in the fourth quarter. Two analysts upgraded the company ahead of its earnings report next week.

In a nutshell, Cisco's fourth quarter sales Wednesday are expected to be in line with expectations, but better cost controls will boost earnings.

Wall Street is expecting Cisco to report fourth quarter earnings of 46 cents a share on revenue of $11.62 billion.

Piper Jaffray analyst Troy Jensen said in a research note:

We believe Cisco will report respectable FQ4 results with revenues in line with consensus, but better margins and cost controls providing upside to earnings per share. Our confidence is based on proprietary channel checks and data points from distributors, coupled with Cisco’s recent improved execution. We expect Cisco will provide some cautious commentary regarding macro headwinds in Europe and the Fed vertical, but believe these concerns are already factored into expectations.

Specifically, Jensen upgraded Cisco to "overweight" from "neutral." Goldman Sachs also upgraded Cisco.


Jensen said that enterprise sales should be solid and carrier demand is spotty. Most analysts expect Cisco to project a 7 percent to 9 percent revenue growth for fiscal 2013. Jensen's upgrade is based on a few moving parts:

  • A reseller survey that indicated Cisco was performing above plan along with HP.
  • CDW said networking revenue was up 20 percent in its June quarter. CDW didn't highlight a specific vendor, but is known to be a key Cisco partner.
  • Cisco's UCS server platform has been selling well.

The networking giant still faces issues, notably software defined networking (SDN). VMware acquired Nicira and Oracle bought Xsigo . Those moves could ultimately threaten Cisco's switching business.

Wells Fargo analyst Jess Lubert said in a research note that Cisco is likely to talk a good bit about its SDN roadmap on its conference call. Lubert added that Cisco should at least meet estimates, but there are wild cards. Cisco should deliver strong data center and service results with mixed switch sales and weak collaboration revenue.


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