Cisco sales pipeline is thawing

In his research note today, RBC Capital Markets Managing Director - Mark Sue offers this refreshing respite, "Cisco's sales pipeline is thawing and we've noticed healthy services revenues offsetting the product softness. The April quarter aside, improving seasonality and a resumption in network switch upgrades may point to better relative trends in the July quarter. Our recent Changewave survey indicates 27% of respondents reporting network utilization of 51-75% up from 23% in the prior quarter. Additionally, 8% of survey respondents indicated they are likely to spend more money in 2Q09 up from 4% in the prior quarter. At its current run rate, we expect Cisco to close the quarter with a book to bill greater than 1.0.

"Gross margins may decline sequentially from 64% but may be modestly higher than the guidance of 63% as Cisco leverages its scale and works to tighten its supply chain as purchase commitments come up for renewal. Cisco's earnings visibility is improving, in our view, driven by stringent cost containment. And while revenues are still decreasing YoY, the rate of decline seems to be moderating. Several quarters of limited visibility may persist since networking equipment may be a mid stage recovery segment, yet we're of the opinion that Cisco may hit its earnings estimate for this year as it aggressively cuts expenses."

Sue concluded, "Cisco may aggressively decrease operating expenses by over $200M sequentially or +7% by leveraging its own telepresence, curtailing travel, and deferring capex. It's a rolling recovering when it comes to the top line and we're estimating April revenues of $8.1B (-17% YoY) and a decrease of -11% QoQ."

Do you think Cisco's sales pipeline is thawing too?

BradReese.Com Cisco Refurbished - Services that protect, maintain and optimize Cisco hardware
Contact: Brad Reese | Twitter: http://twitter.com/BradReese

1. How can we help Cisco's partner talent portal avoid failure?
2. Cisco against Buy America provisions of the $7.2B broadband stimulus fund
3. Cisco may be experiencing some near-term delays with its MDS storage switch refresh
4. Cisco phone inadvertently featured onboard Air Force One
5. Cisco has replaced Intel for second place status on The Mercury News Silicon Valley 150
6. Visual networking meets 2 new visualizations of Cisco NetFlow data
7. Juniper Networks missed its quarter for the first time in a long time
8. Cisco target of 20 patent troll lawsuits
9. Cisco.com domain name about to expire soon
10. Wall Street analyst Mark Sue discusses the long term evolution (LTE) trends at the core
11. Mitch Barrie: The Cisco logo is tattooed on his arm and his dog's name is Cisco
12. Cisco CEO John Chambers disables the flight tracking of his private jet
13. Cisco supports Open Cloud Manifesto, while the Rolling Stones remain holdouts
14. Venture capitalists turn tail rather than compete against Cisco
15. Lookout Death Row Records, here comes a new hit, the Cisco NetFlow Rap song
16. A rival lists Cisco's top 5 worst technology moves
17. Is theft a family tradition of U.S. CIO Vivek Kundra?
18. Is Cisco's true cost purchasing Pure Digital $747M?
19. Cisco unified computing: Gold's gym for buff CIOs or an assisted living center for CIOs to be taken care of?
20. View Brad Reese on Cisco Story Archives

• Cisco
• Data Center
• LANs / WANs
• Security
• VoIP / Convergence
• Wireless / Mobile
• Changewave survey indicates 27% of respondents reporting network utilization
• Cisco leverages its scale and works to tighten its supply chain
• Cisco may aggressively decrease operating expenses by over $200M sequentially
• Cisco may hit its earnings estimate for this year
• Cisco to close the quarter with a book to bill greater than 1.0
• Cisco's earnings visibility is improving