ISI Group Analyst Brian Marshall will also be paying close attention to Cisco's margins. "While CSCO's execution has improved over a prolonged industry downturn (e.g., streamlining costs, divestitures, product refreshes, etc.), the sustainability of gross margins in the low-60% range (e.g., within 61-62% target range) remains uncertain," he wrote, in a note released earlier this week.
Software-Defined Networking (SDN) also poses a threat to Cisco's margin model, according to Marshall, although he feels that the company's efforts in the space will reap dividends.
Cisco's guidance will also prove critical. "We expect roughly in-line results for Apr-13, but wouldn't be surprised to see a more cautious outlook for Jul-13," wrote Marshall, who has a 'cautious' rating on the stock. "While CSCO is trying to create a more stable, software/service-oriented business model, we believe gross margins in its core routing/switching businesses (~50% of revenue) remain under pressure."Analysts surveyed by Thomson Reuters are looking for fourth-quarter revenue of $12.48 billion and earnings of 51 cents a share. Cisco shares, which have crept up 1.24% during the last 3 months, dipped 0.09% to $21.25 during Wednesday's trading. --Written by James Rogers in New York. Follow @jamesjrogers >To submit a news tip, send an email to: email@example.com.