On The Fly: What To Watch In Cisco Earnings Report
Cisco Systems (CSCO) - Get Report is scheduled to report results of its third fiscal quarter after the market close on Wednesday, May 18, with a conference call scheduled for 4:30 pm ET. What to watch for:
1. COMPANY SEES REVENUE GROWTH, ANALYSTS DON'T: Along with its last report, Cisco guided to Q3 EPS of 54c-56c. The consensus at the time was 55c, where it still remains. Cisco guided to Q3 revenue growth of 1%-4% compared to the prior year. Analysts currently see the company reporting revenue of $11.97B. In Q3 of last year, Cisco reported revenue of $12.14B.
2. M&A POTENTIAL: Industry watchers have recently offered their takes on who the company should target. On May 6, Bloomberg Gadfly's Gillian Tan said FireEye's (FEYE) - Get Report depressed valuation may turn the company into a takeover target, noting that the malware detection systems maker has "long been discussed" as a takeover candidate for Cisco. On May 10, Chris Mellor, who covers storage and allied technology areas for The Register, made the case that Cisco should buy Nutanix or Pure Storage (PSTG) - Get Report , or both, to gain a "serious stake" in storage for converged and hyper-converged systems.
3. SECURITY AND DATA CENTER: In a recent note to investors, UBS analyst Steven Milunovich called Cisco the best-positioned systems company, citing its dominance in networking, which is the "least commoditized part of infrastructure," along with its trusted position with customers and management that "appears especially forward-looking" under CEO Chuck Robbins. He said a survey of 50 value-added resellers showed Cisco's position in security is improving and there has been a "major uplift" in the perception of Cisco's data center roadmap.
4. SECURITY SHARE LOSSES: Speaking of security, in mid-February Stephens analyst Jonathan Ruykhaver reported that his checks on Palo Alto Networks (PANW) - Get Report continued to indicate share gains at the cost of Cisco as well as Juniper (JNPR) - Get Report . The checks led him to anticipate Palo Alto's Q2 results would top consensus expectations, which they did.
5. CHINA CONCERNS: China will also be in focus after the New York Times reported on May 17 that Chinese authorities are scrutinizing devices sold in China by Apple (AAPL) - Get Report and other large foreign companies. A committee with ties to China's military and security agencies is forcing foreign tech giants, including Microsoft (MSFT) - Get Report , Google (GOOG) - Get Report , and Cisco, to answer questions about encryption and data storage, the report said, citing people familiar with the matter.
Reporting by Jason Keil
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