Earnings Preview: Cisco Systems

Cisco Systems (CSCO) is expected to report Q3 earnings Tuesday, May 6, after market close, with a conference call scheduled for 4:30 pm ET.

Guidance

The consensus estimate is 36c for EPS and $9.75B for revenue, according to First Call. On the Q2 conference call, management guided for Q3 revenue to increase approximately 10% year-over-year, implying revenue of $9.75M.

Analyst Views

While Cisco is expected to report in-line results, analysts will likely also focus on the company's comments on demand for high-tech gear.

American Technology said that it is not expecting anything great from the quarter, but it does think April will come in in-line. While the firm doesn't know how long or how deep the downturn may be, AmTech does believe Cisco is well-positioned for the environment.

Lazard Capital said Cisco will benefit from the ongoing push to expand computer network infrastructures given its dominant market position and long-term fundamentals remain intact despite the macroeconomic slowdown.

Friedman Billings said that the weaker economic conditions offer Cisco the chance to take share in its existing markets and to expand into new ones. Also, Cisco's strong overseas presence is seen as offsetting demand softness in North America.

Thomas Weisel believes the most important metrics to watch in the April quarter report will be order growth for the commercial segment, domestic and international order trends and core infrastructure order growth. For the July quarter, Weisel believes Cisco will guide in line to slightly below their revenue and non-GAAP estimates of $10.38B and 39c, consensus is $10.30B and 39c. Weisel believes such guidance will balance Cisco's normal fiscal year-end push with caution around macro-sensitive areas such as Ethernet switching, which is 35% of Cisco's revenue and an area particularly hard-hit in calendar Q1.

Citigroup called Cisco's upcoming July quarter as the company's fundamental bottom, citing macro-related softness, seasonality from Europe, difficult year-year compares and a likely temporary disruption from China in front of the Olympics.