Monday, October 29, 2007

Cisco Systems (NASDAQ:CSCO): A Few Lumps, So Expect Some Bumps

- RBC Capital is out with an interesting call on Cisco Systems (NASDAQ:CSCO) saying there's a lot of positive things going on at Cisco and they believe the company remains well placed to benefit from the Video 2.0 cycle. The firm does nonetheless expect some major swings within the enterprise segment and lumpy order growth for the next several months. Subsequently, they expect the stock to remain bumpy in the short-term although they like the story long-term.

RBC expects CSCO's qtr to be fine but despite the good results, they believe the macro environment within certain U.S. enterprise verticals such as financial services, retail and manufacturing has not improved meaningfully in recent months. And although North American enterprise now only represents about 12-13% of total revenues, it's still enough to keep Cisco's stock multiple in check in the near term.

Cisco has already increased its long-term guidance from 10-15% to 12-17% last quarter so the chances of this outlook increasing again are minimal. This year's FY08 guidance may be reiterated at 13-16%. Cisco may point to broad- based balance but some "order lumpiness" in the North American enterprise segment and guide specifically to a revenue range of $9.75B-$9.85B or approximately 16% YoY growth. Consensus remains at $9.80B. Maintains Outperform and $35 tgt on CSCO.

Notablecalls: So RBC expects CSCO stock to remain bumpy in the n-t. Makes me say Hmmmm...

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