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Cisco's Q4FY10 ends with bookings healthy on a month-to-month basis
Mon, 8/2/10 - 10:56am    View comments

I'm moving to New York City this week (you'll find me jogging around the Central Park Reservoir in a BradReese.Com T-Shirt), and next week on Wednesday, August 11 at 1:30PM (PST), Cisco will host its Q4FY10 earnings conference call.

Mark SueCiscoMeanwhile, RBC Capital Markets Managing Director - Mark Sue provides his take on what to expect, "Cisco's quarter ended Saturday, and with additional proof points of a strong quarter to trickle in over the next several days, the stock may display some near-term relative outperformance. Investors may soon turn their focus toward Cisco's healthy fundamentals and stable growth prospects despite the current macro uncertainty. Cisco's revenues may touch $11.0B (+6% QoQ) vs. the consensus of $10.86B while EPS may be two cents better than the consensus of $0.42. We estimate total backlog at ~$5.0B.

"Bookings were healthy on a month-to-month basis and with positive North American trends, little weakness in Europe (~20%), and strong service renewals providing additional revenue growth, Cisco may guide sequential revenues of flat to +2% from a higher base. Consensus is estimating $10.9B for the October quarter. Fiscal 1Q11 is typically more back-end loaded for Cisco with a higher federal contribution. The net result could be that the consensus CY11 EPS of $1.92 will increase modestly post the results."

Sue continued, "Data center growth, Cloud Computing, and Video are the key themes that may add to Cisco's top-line growth prospects over the next several years. Product-wise, Cisco may be gaining positive reception for its Unified Computing Platform, the Nexus series, and the ASR and CRS-3 routers. And while small, the buzz around Cisco's enterprise tablet is accelerating and could bode well for a potential multiplier effect for ancillary networking gear and give Cisco an early-mover advantage as a corporate communications tool."

Sue added, "Gross margins may improve modestly from last quarter's 65.2%, driven by better volumes, higher services and efficiencies. And despite headlines of major price competition, we believe it's been difficult for new entrants to displace Cisco's enterprise incumbency. On inventories, following purchase commitments that increased 30% sequentially last quarter to $4.3B, total inventories of $1.25B may display flat to modestly down sequential trends."

Sue concluded, "Most large-cap tech stocks are in the same situation at the moment with a little Apple envy. Nonetheless, strong trends in video and data traffic growth, data center consolidation prospects and positive dynamics with carriers upgrading networks to IP may enable Cisco's multiple of 12x CY11E to expand."

What's your take, will Cisco's robust results continue?

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