Cisco Earnings Preview: Good Times Ahead for Networking?

The company's earnings today could indicate if a recovery is in motion.

By Sean Michael Kerner | Posted Feb 3, 2010
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Is the market for networking gear in recovery? It's a question that will partially be answered today when networking giant Cisco Systems (NASDAQ: CSCO) reports its second-quarter fiscal 2010 revenues.

During Cisco's first-quarter investor call, CEO John Chambers provided revenue guidance for its second fiscal quarter of an increase in the range of 1 percent to 4 percent, compared to a year earlier.

Wall Street analysts predict earnings of $0.35 per share, according to Thomson Financial -- an upswing from the $0.32 it posted a year ago, when revenue topped $9.1 billion.

UBS analyst Nikos Theodosopoulos expects Cisco to come in at the high end of its guidance. In a research note, Theodosopoulos wrote that strength in the U.S. from both service providers and enterprise customers will help drive Cisco's results. Still, UBS noted that it does not expect Cisco to have the same degree of upside growth as rival vendor Juniper, since service provider revenues represent a greater percentage of revenue for Juniper than Cisco.

If Cisco makes good on those predictions, it will be the second major sign from networking vendors that a turnaround may be near. Juniper reported its fourth-quarter 2009 earnings last week, with revenue of revenue of $941.5 million, up by 2 percent on a year-over-year basis. Executives noted that they see the market for networking improving, led in part by the service provider segment.

From a business perspective, the second quarter was another busy period for Cisco. On the collaboration side of its business, Cisco rolled out a series of new products for video, e-mail, voice and instant messaging. Among them is Cisco WebEx Mail, which is a Linux-powered, hosted e-mail solution that competes against Google's Gmail.

Cisco also updated its Unified Presence 8.0 product to include Jabber XMPP-based presence and messaging.

In January, Cisco unveiled a new home telepresence effort that will bring high-quality video conferencing to consumers later this year.

Cisco also closed a pair of acquisitions during the quarter. Among them was the close of a deal for Software-as-a-Service security vendor ScanSafe for $183 million. Cisco's wireless division also got a boost with the close of the $2.9 acquisition of wireless vendor Starent.

One key deal that Cisco did not close during the quarter was its proposed $3.4 billion bid for telepresence vendor Tandberg, which is still pending final approvals.

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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