Cisco's Q2 might not be so bad after all...

Analyst checks in with channel, sees signs of life

Cisco's second quarter, which the company warned would be very disappointing, looks to be tracking better than expected. Cisco guided to sales up only 3% to 5% from last year's Q2, while consensus analyst estimates were for 13% year-over-year growth.

According to investment firm Oppenheimer & Co., which conducted channel checks with 35 US and European resellers, Cisco's quarter may end up surprising people due to fourth calendar quarter budget flushes and upbeat European sales. Things look even better for next quarter, Cisco's third:

Our contacts were more constructive on the April quarter, suggesting Cisco is working through the January "air pocket"

In addition to budget flushes and an improved European outlook, Cisco's Q2 could be driven by solid upgrade activity, and demand for the Unified Computing System and unified communications/VoIP products, Oppenheimer notes. Channel partners mentioned financial, manufacturing and energy as strong verticals, while public sector and government was, as expected, weak.

Switching, meanwhile, might be in for a fight due to competition from the usual suspects - HP, Juniper and Brocade:

Sequentially, we believe demand for UCS has improved, and we expect its momentum to continue through the rest of year. Regarding the new Catalyst 2960-S and 3750-X/3560-X switches, the ramp was slower than we expected, but we believe it will improve as Cisco targets the commercial/SMB segments.

Oppenheimer's contacts hinted that April quarter sales are set to rise "solidly" from Q2, a view underscored by upbeat commentary from EMC, IBM, Jabil, Flextronics and Celestica. Cisco reports Q2 results Feb. 9.

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