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Cisco Enjoying Healthy Demand, Says Analyst

SAN JOSE, Calif. ( TheStreet) -- Despite fears that Broadcom's (BRCM) results may weigh on Cisco (CSCO - Get Report) when it reports its second-quarter results next week, there are signs that the networking giant is enjoying solid demand for its products.

A survey of 99 Cisco resellers conducted by analyst firm Robert W. Baird has revealed "continued healthy trends" in the company's enterprise and commercial businesses.
Cisco announces its second-quarter results next week

"Commentary from European resellers also trended up quarter-over-quarter," explained Robert W. Baird analyst Jayson Noland, in a note released on Thursday. "We have muted expectations for public spending and expect service provider [business] to pick up through calendar year 2011, as is typical."

Cisco rocked the tech sector with its less-than-stellar first-quarter results last year, noting "air-pockets" in public sector spending and weakness in cable set-top boxes.

Broadcom offered more signs of a slump in the cable TV sector with its fourth-quarter results earlier this week, something that could point to weakness for that part of Cisco's business.

Yet in Robert W. Baird's reseller survey, just over three quarters of the respondents said that Cisco's January quarter was either in-line with or above expectations. Additionally, 96% of the respondents said that they expect "normal seasonality" or better in the April quarter.

Noland maintained his market outperform rating and $26 price target for Cisco, adding that virtualization, video and collaboration technologies such as telepresence and IP phones will be big growth drivers for the firm. "These trends underlie what Cisco calls the 'phase two build-out of the Internet,' which the company believes will drive the next wave of global productivity gains," he said. "We see a number of drivers of a network upgrade including age-of-the-install base, 10-Gbit/s Ethernet, video and, eventually, desktop virtualization."

Analysts surveyed by Thomson Reuters are looking for Cisco to post second-quarter revenue of $10.23 billion and earnings of 35 cents a share, compared to $9.8 billion and 40 cents a share in the same period last year.

Despite its recent problems, Cisco is well-positioned to take advantage of hot tech trends such as cloud computing, and recently beefed up its service provider strategy.

Cisco shares rose 8 cents, or 0.37%, to $21.70 on Thursday despite a modest retreat in tech stocks that saw the Nasdaq slip 0.6%.

--Written by James Rogers in New York.

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