This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Cisco Needs Solid Quarterly Numbers From Software, Services

NEW YORK (TheStreet) -- Cisco (CSCO) reports its fiscal third-quarter results after market close on Wednesday with investors keen to see whether CEO John Chambers can maintain the networker's momentum.

The tech giant beat Wall Street's top and bottom line estimates with record fiscal second-quarter results earlier this year, allaying concerns about enterprise IT spending.

Cisco shares have trailed the Nasdaq Composite Index in 2013 as the San Jose, Calif.-based company's stock has gained 7.9% compared to 15% for the technology benchmark. Cisco was 0.3% to $21.20 heading into the earnings announcement.

Speaking during a post-earnings interview with TheStreet, Cisco CFO Frank Calderoni described an improving spending environment, particularly in the U.S.

Nonetheless, there are lingering concerns that customers are less willing to part with their money.

"Given the muted demand environment that we continue to pick up across the IT world, we believe Cisco will need to deliver another strong quarter of execution to report acceptable profit performance," wrote Brian White, an analyst at Topeka Capital Markets, in a note published Wednesday. "Given the soft March quarter earnings cycle in April and our visit to IT shows in Las Vegas last week, we would not bet on the tailwind of strong end-market demand to drive upside for Cisco in 3QFY13 or 4QFY13."

Despite those misgiving, White has a 'buy' rating on Cisco and predicts the switch maker will at least meet Topeka Capital's earnings forecast of 49 cents a share. As for the topline, White predicts Cisco will meet or slightly miss his revenue estimate of $12.13 billion.

Analysts surveyed by Thomson Reuters are looking for revenue of $12.18 billion and earnings of 49 cents a share.

Those with a strong buy rating cite Cisco's ability to drive growth outside its traditional networking hardware.

Last quarter Calderoni highlighted the importance of software and services in driving recurring revenue, something which could feature prominently in this afternoon's Cisco conference call.

The company's profit margins will also be in the spotlight. Last quarter, Cisco's total non-GAAP gross margin was 62.3%, while non-GAAP operating margin came in at 28.2%. "We believe Cisco has the potential to deliver margin upside in 3QFY13 given the Company's strong execution in this department, along with the conservative margin outlook provided," White wrote. The Topeka Capital analyst expects Cisco's operating margin to dip to 27.4%.

Stock quotes in this article: CSCO, HPQ 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,501.65 0.00 0.00%
S&P 500 1,878.61 +3.22 0.17%
NASDAQ 4,148.3380 +21.3710 0.52%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs