Network Computing is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Spending Haunts Cisco's Q1

Will it be tough sledding for Cisco Systems Inc. (Nasdaq: CSCO) in 2005?

Thanks to increase competition and price pressure in some markets, Cisco may have to innovate in a hurry, according to analysts at UBS AG, who lowered their estimates for Cisco this week. Cisco's current quarter ends on Saturday, and the company will announce its results on Tuesday, November 9.

The research firm reduced its fiscal first-quarter 2005 sales estimates for Cisco to $5.93 billion (from $5.99 billion) and its fiscal year 2005 estimates to $24.67 billion (from $25 billion).

The analysts, Nikos Theodosopoulos and Saud Masud, also lowered their earnings per share estimate for fiscal year 2005 to $0.85 from $0.87. The analysts backed up their move by citing the following factors:

  • Lackluster orders and a decline in networking equipment IT spending. UBS expects a 1 percent to 5 percent drop in orders for routers and switches during 2005 and slower spending on IT gear. The report notes price declines in next-generation enterprise router platforms allow customers to get more router for less money -- a factor that could decrease the frequency of orders.

    RBC Capital Markets analyst Mark Sue adds, in a note published Friday, that the "macro uncertainty impacting network spending by [North American] enterprise customers" will cause Cisco to expect 1 percent to 3 percent sequential revenue growth for the January quarter.

  • 1