PREVIEW-Cisco set for first quarterly sales growth in year

* Analysts see fiscal Q2 revenue $9.4 bln, up year-on-year

* Eyes on long-term outlook, growing competition

* Q2 Feb 3 after market close

By Ritsuko Ando

NEW YORK, Jan 29 (BestGrowthStock) – Cisco Systems Inc (CSCO.O: ) is
expected to post its first quarterly revenue growth in more
than a year when it reports results, as customers more
confident about the economy upgrade their networks.

While stronger-than-expected results could provide a jolt
to the stock, which has languished for the past three months,
investors will also focus on longer-term issues like new rivals
Hewlett-Packard Co (HPQ.N: ), International Business Machines
Corp (IBM.N: ) and China’s Huawei Technologies Co [HWT.UL].

Cisco is one of the first major technology companies to
report results including much of January 2010. Its performance
and outlook are often an early indicator for the rest of the
technology sector, especially in enterprise spending.

Results in the past few weeks from rivals Juniper Networks
(JNPR.N: ) and Intel Corp (INTC.O: ) have reinforced hopes that
corporate spending is back after two years of dismal growth.
[ID:nN28158959] [ID:nN13151343]

“Fundamentally, things are strengthening for Cisco, and
despite some lingering component shortages, we believe the
company closed its January quarter on a positive note,” said
RBC Capital Markets analyst Mark Sue.

For the fiscal second quarter ended Jan. 23, analysts on
average expect Cisco to report revenue of $9.4 billion, up from
$9.1 billion a year earlier, according to Thomson Reuters
I/B/E/S. Results are due Feb. 3 after the market closes.

Analysts expect the recovery to continue through 2010 and
forecast revenue to rise to $9.5 billion in the third quarter.

Cisco’s revenue had been falling since the January quarter
of 2009. Now, analysts say customers, including phone companies
and large corporations, have struggled to cope with growing
wireless and Internet traffic.

They said the results and outlook for the new quarter will
likely underscore stronger demand for Cisco’s routers and
switches, although some warned that a shortage of components
may have constrained growth.

MORE RIVALS AHEAD

Investors will once again scrutinize Chief Executive John
Chambers’ comments next week. At the World Economic Forum in
Davos on Friday, he told CNBC that global economies had become
more stable.

“Here in Davos, the mood is much more positive than a year
ago, especially for the technology companies,” he said.

Analysts hope he will also address how the company plans to
compete with a growing number of rivals.

In addition to long-time rivals like Juniper and Brocade
Communications Systems Inc (BRCD.O: ), Cisco now vies with
large-technoogy companies like HP, which is set to buy network
equipment company 3Com (COMS.O: ).

Cisco has encroached on HP and IBM’s turf by selling
software, data center servers and a wider range of technology
services. Those companies have in turn retaliated by forging
sales partnerships with other network equipment makers.

Cisco’s main advantage against its smaller rivals has been
its large sales force, as well as the breadth of its portfolio.
Analysts say its newer rivals may be tougher to beat.

“Now we’re seeing these super big companies. The dynamic is
changing,” said Catharine Trebnick, analyst at Avian
Securities.

Chambers is also expected to elaborate on the company’s
plans in China, where it competes with Huawei and others. It
has announced plans to buy the set-top box business of Hong
Kong-based DVN Ltd (0500.HK: ), its first acquisition aimed at
the world’s No. 3 economy.

Cisco announced in January that it was restructuring its
management to create an independent segment for China, and that
it would relocate its top executive in the region to Beijing
from Hong Kong.

That announcement came a day before Google’s (GOOG.O: )
surprise revelation that it may leave China. While it is
unclear whether Cisco knew about Google’s move, analysts said
it underscored the company’s intent to show it was committed to
doing more business there.

Chambers met Chinese Vice-Premier Li Keqiang in Davos.

Stock Market Basics

(Editing by Edwin Chan and Bernard Orr)

PREVIEW-Cisco set for first quarterly sales growth in year