Cisco: Expect Modest Upside

CSCO : SEE MODEST UPSIDE TODAY. CSCO reports FQ4 results today (8.5.09) after the close. The Street expects FQ4 revs of $8.519B, +0.9% above the midpoint of mgmt’s guidance of $8.447B. Street FQ4 revs assume +4.4% Q/Q growth (7-yr avg +5.0%; s=3.02). Street FQ1 revs are $8.589B (+0.8% Q/Q; 8-yr avg of +2.0%; s=2.95). Thus, Street expectations are modestly below historical norms, and we see modest upside given supply chain data that suggest early stages of economic recovery. We are Long CSCO (7.10.09) stemming from Hon Hai’s (HNHAF.PK) record Jun results and a stabilizing in enterprise IT spending.

COMPETITORS: STABILIZING.

Competitor data for CSCO is best characterized as stabilizing, with the highest guidance relative to the Street +2.1% above expectations (FFIV), and the worst down -6.8% (ARRS)—or else no guidance at all due to a still-cautious outlook.

EXTR (7.30.09): FQ4 revs +3.7% above Street; no guidance

ARRS (7.30.09): Q2 revs -0.9% below Street; sees Q3 revs -6.8% below Street

MOT (7.30.09): Q2 revs -1.9% below Street; no specific overall guidance; Home biz (set-top boxes) was flat Q/Q

SONS (7.30.09): Q2 revs +30.4% above Street; no guidance; cautious

CHKP (7.28.09): Q2 revs +1.9% above Street; no guidance

ERIC (7.24.09): Q2 revs +4.8% above Street; no guidance

RVBD (7.23.09): Q2 revs -2.8% below Street; sees Q3 revs -0.8% below Street

JNPR (7.23.09): Q2 revs +2.5% above Street; sees Q3 revs -0.3% below Street; “market continues to stabilize”; Enterprise (~35% of total revs) up +12% Q/Q, but in part due to share gains and “recovery will take some time”

FFIV (7.22.09): FQ3 revs +3.0% above Street; sees FQ4 revs +2.1% above Street

CTXS (7.22.09): Q2 revs +1.6% above Street; sees Q3 revs +0.3% above Street

NTGR (7.22.09): Q2 revs +2.0% above Street; sees Q3 revs +2.0% above Street

SUPPLIERS: LOOKING BETTER. Supplier data points for CSCO have had a positive tone, with guidance relative to the Street ranging from +12.7% (BRCM) to -12.35 (TUNE).

FNSR (8.4.09; 0.6% of CSCO COGS): sees FQ1 (Jul) revs +8.7% above Street; product revs for 10Gb apps and ROADMs “particularly strong”

NETL (7.29.09; 0.3% of CSCO COGS): Q2 revs +1.3% above Street; sees Q3 revs 36.6% above Street (ex IDT and RMI acquisitions, +3.89%); revs from CSCO grew +14.4% Q/Q; “improving demand...across our products”

FLEX (7.29.09; 10.0% of CSCO COGS): FQ1 revs +4.3% above Street; sees FQ2 revs -4.4% below Street; Infrastructure segment up +0.3% Q/Q; results dragged down by Nortel, Sony Ericsson

STM (7.28.09; 0.7% of CSCO COGS): Q2 revs +8.1% above Street; sees Q3 revs +7.6% above Street

CAVM (7.28.09; 0.1% of CSCO COGS): Q2 revs +3.5% above Street; “seeing a healthy rebound in the Enterprise and Data Center markets, which bodes well for the second half of the year”

IDTI (7.28.09; 0.6% of CSCO COGS): FQ1 revs +2.7% above Street; sees FQ2 revs +7.9% above Street

BRCM (7.23.09; 3.6% of CSCO COGS): Q2 revs +5.7% above Street; sees Q3 revs +12.7% above Street; Q2 enterprise networking down -4% Q/Q, but mgmt sees “some signs of customer activity” in the enterprise mkt leading to growth in Q3

PMCS (7.23.09; 0.1% of CSCO COGS): Q2 revs +2.8% above Street; sees Q3 revs +4.5% above Street

TUNE (7.23.09; 0.3% of CSCO COGS): Q2 revs +8.4% above Street; sees Q3 revs -12.3% below Street

CLS (7.23.09; 4.9% of CSCO COGS): Q2 revs +1.1% above Street; sees Q3 revs +0.4% above Street; Enterprise Networking grew +4.5% Q/Q in Q2

SANM (7.22.09; 3.3% of CSCO COGS): FQ3 revs -0.7% below Street; sees FQ4 revs -1.1% below Street; Communications down -0.2% Q/Q; Components book-to-bill 1.21:1; overall B:B >1.0:1; sees “stability with some upside” in Sep Q, with further improvements in Dec Q

Hon Hai (7.10.09; 12.8% of CSCO COGS): Jun revs +39.6% M/M; largest M/M increase in any month this decade

JBL (6.23.09; 10.9% of CSCO COGS): FQ3 revs -0.2% below Street; sees FQ4 revs -4.3% below Street; Networking down -14% Q/Q; “starting to see Enterprise spending in some of the US markets pick up a bit.”

Disclosure: No positions