After the close on this coming Wednesday, we’ll get to see earnings out of perhaps one of the most important tech companies: Cisco Systems, Inc. (NASDAQ:CSCO).  The estimates from First Call for the networking giant are $0.38 EPS on $9.8 billion in revenues.  Estimates for the following quarter are $0.40 EPS on revenues of $10.2 Billion and fiscal July 2008 estimates are $1.59 EPS on $40.36 billion in revenues.

Analysts have an average price target upwards of $34.00 per share, despite the massive slide we have seen in this stock since its last earnings.  Cisco’s last post-earnings stock trading  was hampered by weak financial services spending because of the malaise in the sector, and there was a small footnote brought up that some may interpret as a peaking out (in the growth rates, not total) from what have been the top emerging markets.

• Here was our commentary from the last earnings conference call.

If Friday’s closing prices were to stay static and not counting any extra time value erosion, it appears that options traders are pricing in a move of up to $1.00 in either direction.  We caution that the stock and this number may be drastically different by the time next Wednesday’s close gets here.

This chart has been ugly since its last earnings and it has slid lower since December 31 as well.  The only good news is that the stock has only had one close below $23.50 in this last down cycle and it bounced sharply off of intraday lows just under $22.50.

While we’d expect yet another great discussion of how Cisco’s TELEPRESENCE is changing the world and that the Internet growth is still in the greatest opportunity for growth, we’d expect investors to be looking for any clues as to how it is holding up domestically in the enterprise market (including financials) and how those emerging markets are buying their wares.  If the company has been buying back stock aggressively, it hasn’t helped.

After Juniper Networks (NASDAQ: JNPR) gave strong comments, it is hard to fathom that Cisco would be faltering.  We’ll know on Wednesday afternoon.  It has also sold off so much more than most would have guessed 90 days ago that we’d expect Wall Street to have priced in at least a little more caution from John Chambers. 

Cisco’s 52-week trading range is $22.30 to $34.24, so the Friday close up almost 2% to $24.94 is what the bulls will be hoping for the worst to be behind it.  With a current fiscal year P/E ratio of 15.7, we are scratching our heads wondering how low the stock has to go before every fund manager in the world decides they have to double up on their positions.  Cisco is still a growth stock, it has the GARP characteristics (growth at reasonable price), and it is now looking like one serious value stock if it continues to make its numbers.

Jon C. Ogg
February 2, 2008

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