Cisco Systems FQ3 May Fail To Impress, FQ4 To Be Strong

Cisco Systems

Cisco Systems, Inc. (NASDAQ:CSCO)’s Enterprise and Commercial segment did not have an impressive start to the year, but the company has a strong pipeline of business for the FQ4, says a report from Baird Equity Research analysts Jayson Noland and Astasia S. Myers which is dated April 28, 2014. The findings are based on a survey of 81 participants or re-sellers who account for $10 billion in annual Cisco sales. Around 56% of them are located in North America.

BRICs might not add to growth

Some of the partners raised concerns that some election-related headwinds in India might affect the growth of the company. In Brazil, both World Cup and election-related issues are expected to hit growth. Analysts believe China and Russia will continue to remain a challenge for Cisco Systems, Inc. (NASDAQ:CSCO). Emerging markets contribute around 20% of the company’s revenues, and for the FQ3’13, EM orders for Cisco increased by 13% year over year.

For Cisco Systems, Inc. (NASDAQ:CSCO) rivals, service provider results have gone well so far this year. The management of the company “has consistently said NCS and CRS-X testing will result in spending delays for a few quarters,” according to the report. In the last quarter, service provider orders declined 12% year over year.

On the basis of the survey, analysts conclude that SDN (Software-Defined Networking) enjoys limited popularity among the broader corporate market. “Of the VMware partners that have customers interested in NSX,” almost 90% are expected to use it in addition to Cisco’s existing offerings.

Cisco may go for acquisitions

Also many of the partners expect the company to go for a “large or strategically meaningful acquisition” in 2014. The analysts list a range of possibilities like Big Data, Storage, and Security.

For FQ3, the survey results were not very impressive, with many Cisco Systems, Inc. (NASDAQ:CSCO) partners suggesting a weak start to the year. Even though Cisco has recovered from the late 2013 lows of $20 per share, expectations for FQ3 results are “fairly low,” believe analysts.

On the basis of feedback from the Fed-focused channel partners, analysts say that in recent times, activities have been better compared to last quarter. Analysts expect Cisco to witness positive trends in the FQ4 and FQ1’15. Baird analysts have an Outperform rating on Cisco Systems, Inc. (NASDAQ:CSCO) with a price target of $26.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at

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