RBC analyst on Cisco FY4Q08: Indications that bookings are tracking slightly ahead of plan

FY4Q08 indications that bookings are tracking slightly ahead of plan
Yours truly received the following information from RBC Capital Markets this morning regarding Cisco's 4th quarter which ends this Saturday:

Mark Sue
Managing Director of RBC Capital Markets - Mark Sue, is indicating that Cisco's FY4Q08 bookings are tracking slightly ahead of plan. RBC is estimating revenues of $10.33B, an increase of 6% QoQ and 10% YoY. The incremental strength may be coming from services orders (~15%) and a rebound in emerging markets (~11%).

The overall North American enterprise segment remains mixed and several verticals are reporting a resumption in spending while others remain highly challenged. Balance across segments and geographies is enabling Cisco to display better relative trends.

Cisco stock is down ~21% from its interim high and trading at just 13X RBC's CY09E earnings of $1.70 (consensus of $1.76). And considering RBC's view of strong near term results despite the negative sentiment, RBC believes the stock is a long. The stock is now trading near five year trough PE levels.

Cisco is exercising strong cost control and limited hiring and reduced share count may yield a penny better to RBC's FY4Q08 EPS estimate of $0.38. Operating expenses overall may trend near the low end of the guidance range of 36% to 37% according to RBC's sources.

The upcoming October quarter is seasonally weaker for Cisco yet RBC believes the company is building on its base level backlog which RBC estimates over $4.5B, providing additional comfort to RBC's revenue estimate of $10.4B or just 1% sequential growth and 9% YoY. Overall book to bill is shaping up greater than 1.0. Cisco in RBC's view will stick to its much longer term 12% -17% top line growth. Where things become variable is the January quarter where RBC is estimating revenues of $10.75B (+9%) vs. the consensus of $10.77B.

Cisco may point to growth outside of the US with strong progress in China and India. Japan finally seems to have turned the corner in terms of carrier spending. Broader stabilization in the US and a deeper dive into the commercial segment may enable to build upon its base level revenues. Cisco is not immune to macro economic trends and some sorely needed tailwind will be required for the company to meet targets for fiscal 2009, in RBC's view. For the near term however, Cisco may display strong positive metrics.

Do YOU agree with RBC's contrarian viewpoint, that despite negative sentiment Cisco could very well be a good near term investment?

Contact Brad Reese
http://www.BradReese.Com Search 54,985 current Cisco Job openings worldwide!

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