Wall Street analyst suggests Cisco may recover lost market share during 1Q10

Heavy SMB product discounting at the reseller level indicates Cisco is re-adjusting its channel programs.

In his research note today, RBC Capital Markets Managing Director - Mark Sue believes Cisco has a shot at reclaiming its lost market share, "Our current RBC/Changewave survey indicates Cisco may recover some lost share: 80% of respondents who plan to purchase network equipment over the next 90 days plan on using Cisco (vs. 75% in Q1/09 and 78% in Q4/08). Also, 11% of respondents using Cisco now said they will spend more money in the next 90 days (from 8% prior). There are challenged enterprise segments (retail, transportation, mfg.) and most IT managers are focusing on projects with a short payback period. We are noticing pockets of strength, however, in financials, education, healthcare and federal. "It's shaping up to be a good quarter and we anticipate a rolling recovery of the enterprise and service provider segments. On a YoY comparison basis, the comps may generally get easier as Cisco progresses through the balance of 2009. Next year is when Cisco may benefit from the broadband stimulus bill and gain traction with the Unified Computing platform; the latter is important since it's one of the reasons the multiple was compressed."

Sue added, "With a better noted pipeline, we're increasing our revenues for the October quarter from $8.35B to $8.50B, implying that Cisco's current FY4Q09 will mark the bottom in terms of YoY revenue decline. If things line up for Cisco - broad themes in video traffic, share gains in data centers, a revamped enterprise strategy - our bull case points to potential CY10 earnings of $1.40 vs. our baseline of $1.28. "On the service provider segment, the depressed amount of wireline capex during 1H09 may bode well for both cable and telco spending during 2H09. The first round of the broadband stimulus plan will be ~$4B (total $7.2B) and will be earmarked for high speed connectivity to rural and underserved regions. Cisco remains active with qualification metrics to pursue its share of the meaningful upgrade opportunity, which should kick in meaningfully in 1H10." Sue concluded, "Lastly, though we've noted more discounting at the reseller level for SMB products, most of it may be Cisco re-adjusting channel programs and less related to any systematic price cuts. With its broad product portfolio, Cisco may see no material changes to overall gross margins. For the July quarter, we're at $8.45B and $0.28." ---------------------------------------- In my opinion, it appears that Wall Street is now confirming my blog story that HP ProCurve has been dismantling Cisco market share.


Do you concur with Wall Street that Cisco will recover lost market share in 1Q10? BradReese.Com Cisco Refurbished - Services that protect, maintain and optimize Cisco hardware Contact: Brad Reese | Twitter: http://twitter.com/BradReese

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