Q4 tracking nicely for Cisco: analyst

Lazard Capital Markets sees uptick in switching, advanced technologies; routing "stabilizing"

Lazard Capital Markets is rating Cisco a "buy" just weeks before it closes its books for the fourth quarter and fiscal year 2009. Cisco's fiscal year ends late this month and it will report its results in the first week of August.

In a bulletin on the quarter this week, Lazard notes that Q4 is tracking ahead of expectations with improved bookings growth. The firm attributes the strength in Q4 to an uptick in switching, continued success in Cisco's Advanced Technologies portfolio, and stabilization in orders for routers.

Lazard believes Cisco hit bottom in Q3 and might now be coming up from the trough. The firm also believes Cisco implemented "aggressive expense management" during the quarter, including further headcount reduction and discretionary spending cuts. Lazard believes Cisco will achieves the $1.5 billion cost reduction goal it laid out in Q1.

Cisco last week refuted reports that it was accelerating or expanding its workforce reduction beyond the 1,500 to 2,000 positions previously disclosed.

Lazard is raising its estimates slightly for Cisco in Q4, noting that revenue will be down 16.5% to 17% from last year vs. the consensus view of an 18.2% decline. The firm expects guidance for the October quarter to reflect "the usual caveats" as well as seasonality, but the firm expects Q1 2010 revenue forecasts from Cisco to come in at $8.6 billion to $8.9 billion (down 14% to 17% year-over-year), vs. Wall Street estimates of $8.5 billion (down 17.5%).

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