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Cisco Earnings Preview: Guidance is Key

Juan Aruego,|Editor, Research HKSCKPVIamp; Planning
Wednesday, 6 Feb 2008 | 1:32 PM ET

CISCO SYSTEMS (CSCO)

Dominant maker of computer networking equipment. Bellwether tech company.

Reports Q2 earnings Wednesday Feb. 6 at approx. 4p et. Conference call at 430p et.

AP

WHAT WILL MOVE THE STOCK:

WHERE TO NOW? Guidance is likely to overshadow last quarter's actual results... just as it did for Apple and others. What does Cisco expect its revenues to be this year? See estimates below for specific numbers. Sadly, Cisco has not given earnings guidance recently.

WHAT WE'RE LIKELY TO HEAR - An in-depth breakdown of where sales were good and where they weren't. Last quarter, Cisco singled out auto and financial services' customers as showing significant sales weakness. Regionally, sales in the Asia/Pacific region grew faster than in the US. Cisco also predicted US sales would be soft and "lumpy." Has the U.S. outlook improved? What about sales to the financial sector?

SHARE BUYBACKS- On Nov. 16, Cisco added another $10 billion to its stock repurchase program, raising the total authorized amount to $62 billion. How much stock has Cisco bought recently? Will Cisco speed up its buybacks now that the stock is trading near its 15-month low?

GOLDMAN'S TAKE - Our Silicon Valley reporter Jim Goldman hits most of the same points in his blog, but he does it more eloquently. He emphasizes how much impact a good or bad Cisco report could have on the rest of the tech sector.

ESTIMATES

Q2 Estimates: EPS up 14% to $0.38, revenues up 16% to $9.793 billion

Q3 Estimates: EPS up 16% to $0.39, revenues up 15% to $10.196 billion

FY 08 Estimates: EPS up 19% to $1.59, revenues up 16% to $40.336 billion

Source: Thomson Financial

Cisco says FY 08 revenue growth will be in line with its long-term growth rate of between 12% and 17%. This translates to between $39.5 billion and $40.5 billion.

On Nov. 15, Cisco said Q2 revenue growth would be 16% which translates to $9.79 billion.

Year-ago actuals: Q2 EPS $0.33, Rev. $8.439 billion

Factoids:

ROUGH QUARTER - On Nov. 6, the day before its last earnings report, Cisco shares closed at $34.06 -- the highest level in nearly seven years. Since then, the stock has fallen about 30%. On Jan. 23, Cisco dropped to a 15-month intraday low of $22.30.

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