"Cisco's performance stands out as one of the best in the IT world this season as the Company continues to execute well in a lackluster demand environment," wrote Brian White, an analyst at Topeka Capital Markets, in a note. "The combination of last night's performance and Cisco's attractive valuation should garner the attention of more value investors."
White, who rates Cisco buy with a $23 price target, raised his second-quarter revenue target from $11.76 billion to $11.96 billion and his earnings estimate from 45 cents to 47 cents a share. The analyst also raised his fiscal 2013 and 2014 earnings forecasts from $1.82 to $1.92 a share and from $1.92 to $2 a share, respectively.
Chambers returned repeatedly to the theme of Cisco as an "IT player" during the earnings conference call. Clearly, the company's future lies not just in networking, but in providing a broader range of hardware, such as its UCS server product, and services.
"For the first time we are starting to see our leadership in IT, especially the UCS, pull through our communication products," he said. "This is especially important in terms of how CIOs are beginning to view Cisco, not just as a leader in communications, but view us as an IT player, who also does communications."
Cisco's data center revenue, which encompasses UCS, climbed a massive 67% from the prior year's quarter, although at $417 million, still accounts for a relatively small proportion of total revenue. The company's services business, however, is much more sizable, with revenue growing 12% year over year to reach $2.6 billion, almost 22% of overall revenue.
The Cisco chief also downplayed the risk of a looming fiscal cliff on the conference call, expressing confidence that Washington will work through the problem, albeit "with a bit of saber-rattling" on both sides.
Similarly, Chambers is also confident that the U.S. can avoid a trade war with China, even after the damning
House Intelligence committee report on Huawei and ZTE
"The two countries have to work very closely to get other," he said. "I think you'll see the two sides work it out, because it's in the best interest of the world to do in both economies, and, candidly, in the best interest of the U.S. as well."
Cisco shares were up 6.53% to $17.95 on Wednesday.
--Written by James Rogers in New York.
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