PREVIEW-Cisco results seen strong but Europe worries abound

* Fiscal Q3 results due after market close on May 12

* Wall Street sees revenue up 25 pct to $10.23 bln

* Street sees Q4 revenue $10.62 bln

* Analysts say Europe a concern

By Ritsuko Ando

NEW YORK, May 7 (BestGrowthStock) – Cisco Systems Inc (CSCO.O: ) is
expected to report a 25 percent rise in quarterly revenue and
give an upbeat outlook next week but worries of troubles in
Europe may prevent the shares from rallying much.

The results are likely to show a recovering U.S. economy
and increasing Internet traffic encouraging companies to buy
more network equipment from Cisco. But analysts said jitters
about Europe’s economy will weigh on investor sentiment.

“Clearly, April was a good quarter for Cisco. The numbers
will be good. But you have to pay attention to what’s happening
in the global economy,” said Broadpoint AmTech analyst Mark
McKechnie.

“Europe is 20 percent of Cisco’s business, and you have to
imagine that the business opportunity there is different from
four weeks ago when the Greek troubles started.”

The euro this week hit a 14-month low against the dollar on
concerns that Greece’s debt problems could carry over to other
Western European countries like Portugal, Italy and Spain and
hurt growth in the overall European region.

The Dow on Thursday suffered its biggest ever intraday drop
as a suspected trading glitch and euro debt fears threw the
market into chaos. Shares of Cisco, one of the most important
barometers for the tech industry, have fallen around 8 percent
this week.

Cisco’s results for its fiscal third quarter ended May 1
will not have been affected by troubles in Europe. Analysts
expect profit excluding items to rise to about 38 cents a share
from 30 cents a year earlier, on revenue growth of 25 percent
to $10.23 billon, according to Thomson Reuters I/B/E/S.

Wall Street also expects revenue to rise further in the
fourth quarter to $10.62 billion. If Cisco’s outlook exceeds
that, that could help the stock recover from the latest
sell-off, although gains may be limited, analysts said.

Shares of other tech bellwethers such as International
Business Machines Corp (IBM.N: ) have suffered despite strong
results and solid outlook.

“If you are able to put up a good quarter and give good
guidance, I think you can have the stocks react favorably. But
right now, the trend is to pick profits on winners,” said
Jefferies & Co analyst William Choi.

“Clearly people are concerned about the PIGS economies
(Portugal, Italy, Greece and Spain) having an impact throughout
Europe and who knows where else.”

CHEERLEADER CHAMBERS OR CAUTIOUS CHAMBERS?

Analysts will be listening to Cisco Chief Executive John
Chamber’s comments for any change in his typically optimistic
tone.

The charismatic Silicon Valley veteran is often seen as the
technology sector’s biggest cheerleader due to his upbeat
declarations on the economy and potential of the Internet. But
he has also, on occasion, alerted investors to troubles ahead.

In 2007, Chambers was one of the first to admit to a
dramatic fall in orders from banks, cautioning the market that
the financial sector’s problems were spreading to the broader
economy. Other executives at the time had said the impact was
limited.

Investors will also be on the alert for comments about
growing competition with Hewlett-Packard Co (HPQ.N: ) and IBM, in
addition to traditional networking rivals like Juniper Networks
Inc (JNPR.N: ).

Cisco, the world’s biggest manufacturer of routers and
switches, last year expanded into data center servers. The move
pits the company against HP and IBM, both its historical resale
partners.

HP and Cisco have since become rivals rather than partners,
with HP buying 3Com, a smaller network equipment competitor to
Cisco.

Analysts say the competition isn’t likely to hurt Cisco’s
results yet, but many plan to keep an eye on how Cisco steps up
its game, and whether it will offer aggressive discounts or buy
more niche technology companies.

Some have said Cisco could buy a data storage company like
NetApp Inc (NTAP.O: ) to compete against HP, although others say
such a move was unlikely given recently higher valuations.
NetApp shares have nearly doubled from their year-low in May
2009.

“I don’t think they need to. I certainly don’t think they’d
buy this far into a recovery. My sense is that if they were
going to do a big acquisition they would’ve wanted to do it
when the market was depressed,” said Broadpoint’s McKechnie.

Indeed, Cisco announced a series of acquisitions late last
year, including a deal worth over $3 billion for Norwegian
videoconferencing company Tandberg.

The move, an extension of the company’s efforts to move on
from its traditional focus on routers and switches, has made
Cisco the world’s biggest videoconferencing provider.

Stock Market Trading

(Reporting by Ritsuko Ando, editing by Tiffany Wu and Derek
Caney)

PREVIEW-Cisco results seen strong but Europe worries abound