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Richard Davenport is the founder of Connexiti LLC (http://www.connexiti.com), the leading provider of supply chain research, data, and analytics. Prior to founding Connexiti, Richard was a research analyst for Citigroup in New York, where he formalized supply chain analysis as a discipline and... More
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  • Supply Chain Insights : Expect Modest Upside For CSCO 0 comments
    Aug 4, 2009 08:40 PM | about stocks: EXTR, ARRS, MOT, SONS, CHKP, ERIC, RVBD, JNPR, CSCO, FFIV, CTXS, NTGR, FNSR, NETL, FLEX, STM, CAVM, IDTI, BRCM, PMCS, TUNE, CLS, SANM, JBL

    CSCO : SEE MODEST UPSIDE TOMORROW. CSCO reports FQ4 results tomorrow (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 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
    Themes: Networking Stocks: EXTR, ARRS, MOT, SONS, CHKP, ERIC, RVBD, JNPR, CSCO, FFIV, CTXS, NTGR, FNSR, NETL, FLEX, STM, CAVM, IDTI, BRCM, PMCS, TUNE, CLS, SANM, JBL
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