Cisco expected to have solid quarter

Two firms say product delay issues not impacting company

Despite the product lead time issues, Cisco's April quarter appears to be on track or even ahead of expectations, according to updates from two investment firms. UBS says its channel checks and the results of peers indicate a solid quarter in enterprise from Cisco, especially in the US and Asia. 

UBS expects in-line or better revenues than its estimate of $10.28 billion for the quarter. Oppenheimer & Co. says its interviews with 30 channel partners in the US and Europe suggest better than expected sales, backed by a growing pipeline, upgrade cycles and improved spending, "despite some product shortage in switching and security." 

Cisco, due to supply constraints, is quoting lead times of as long as six months on some products. In some cases, it is opening up opportunities for competitors. But according to Oppenheimer: 

We believe ongoing product shortages, particularly in security and switching, are due to strong demand and possibly poor planning. Most channels expect the shortages to be resolved within 60 days. 

UBS notes that Cisco, perhaps due to some loosening of supply constraints, has stretched its payment terms to suppliers from 30 days to 60 days beginning May 15: 

The timing of this change may suggest that Cisco sees supply chain tightness improving post May. Our checks show the supply chain is improved vs. the beginning of the year, but certain products still have extended lead times to VARs. 

Meanwhile, particular areas of product strength for Cisco in the quarter are in unified communications, switching and security. The company's Unified Computing System for data center consolidation and virtualization is also appears to be gaining traction - most of those partners interviewed by Oppenheimer expect "moderate to high" adoption for UCS by year end. Respondents noted stronger UCS interest than last quarter, when most indicated little sales momentum. 

The new fixed configuration Catalyst switches Cisco recently rolled out - the 2960-S, and 3560/3750-X variations - are also seeing "moderate to strong" traction as well, according to Oppenheimer. The recently closed Tandberg acquisition, however, won't impact Cisco positively until FY 2011 when it could account for $1.2 billion in sales, Oppenheimer states.

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