Calls of Note Part 5

Goldman Sachs out with the results of IT survey, conducted in mid-August 2006, that suggest strong outlook for Cisco (NASDAQ:CSCO). The results are following:

(1) 67% of respondents, a new survey all-time high, expect to increase spending with Cisco over the next 12 months vs. 64% in June. It is also important to note that the percentage of respondents indicating that Cisco-specific spending will decrease, remains at low single digits. We believe CIOs must increasingly address network needs related to security, reliability, and capacity.

(2) 65% of respondents surveyed expect to increase their spending in networking over the next 12 months, compared with 76% in our last survey, and 64% in the survey before. Only 5% of respondents indicate a decrease, and another 30% indicate flat spending.

Two key points:
(A) The 11% drop in respondents increasing spending, and related shift to flat is a potential red flag that we will monitor, (B) Our Cisco specific question produced incrementally improved results, while the overall networking question was incrementally more cautious. We believe this discrepancy is explained by Cisco's breadth of high growth technologies that are not in its traditional routing and switching products, such as security and VoIP.

Notablecalls: Nothing really new as the time/results of the survey are about the same as Cisco's last earnings/guidance report that has acted as a catalyst for the stock. Good for the sentiment, though. Note that the recent mkt rally started just after CSCO's 4Q06 report.