Cisco Fans Eager to See IT Recovery

Monday's selloff notwithstanding, it seems clear the economy is improving. Now Wall Street is itching to see if tech spending is picking up, too.

That's why all eyes will turn Tuesday afternoon to Cisco (CSCO). The big San Jose, Calif., network gearmaker is set to post fiscal third-quarter results. Coming on the heels of last week's solid April jobs report and Monday's inflation-fearing rout, the company's comments should give investors a read on the hotly anticipated information technology-spending recovery.

Some analysts say the stage is set for a return to sunny words from Cisco CEO John Chambers. After long embodying Silicon Valley's sky-is-the-limit side, Chambers in recent years has offered little more than guarded optimism.

But now there's reason to believe Chambers will have an opportunity to change his tune, analysts say. And that's likely to be a good thing, not just for the broader tech sector but also for Cisco's struggling stock, which has lost 25% off its January high.

"He may have to put a lid on that caution," says Friedman Billings Ramsey analyst Susan Kalla. "Jobs are up. IT spending should be up. I think they may come out with some aggressive guidance."

Kalla has a buy rating on Cisco, and FBR makes a market in Cisco stock, which fell 7 cents Monday to $21.62.

Stuck in the Mud

This isn't to say everyone sees the quarter as a slam-dunk. Investors, after all, haven't been treated to any stirring success stories lately among Cisco's networking gear peers. Juniper's (JNPR) sales in the first quarter, while solid, were not enough to satisfy rising expectations. Meanwhile, Lucent (LU) turned in a ho-hum performance and Nortel (NT) got swallowed up in a widening accounting scandal.

As for Cisco, a slow start in February gave way to brisk sales in March and April, say industry observers who have checked supply channels. On average, analysts expect the company to post an 18-cent-per-share profit on $5.5 billion in sales, according to a Reuters Research tally.