Cisco Earnings Preview: Good Times Ahead for Networking?

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

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
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, the news service of, the network for
technology professionals.

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