Earnings Preview for Cisco Systems (CSCO, HPQ, JNPR, XRX)

Cisco Systems CSCO is expected to announce its Q1 earnings results on Wednesday, May 11, after the markets close. Analysts are expecting earnings per share to be $0.37, which represents a fall of 11.9% on the previous year's value of $0.42. Revenues are projected to stand at $10.86 billion, or an increase of 4.8% on Q1 2010. Cisco Systems designs, manufactures, and sells Internet protocol-based networking and other products related to the communications and information technology industry and provide services associated with these products and their use. The company provides a line of products for transporting data, voice, and video within buildings, across campuses, and around the world. Looking ahead, analysts expect earnings per share to keep falling year-over-year, though at a decelerating pace. In the following quarter, Cisco is expected to post earnings per share of $0.42, down 2.3% on Q2 2010. For the whole year, earnings per share is projected to stand at $1.59, or a fall of 1.2% on last year. Analysts expect revenues will grow throughout the year, however. In the following quarter, revenues should reach $11.67 billion, an increase of 7.7% year-over-year. For the year as a whole, revenues should stand at $43.70 billion, up 9.1% on 2010. Cisco's Chief Executive John Chambers recently admitted that the Silicon Valley giant has lost its way, following a series of disappointing results. Investors will be hoping that this year will be the turning point for Cisco on its path to restoring its former glory. Cisco initiated an ambitious restructuring plan, which includes focusing on its stronger areas. As a result, Cisco announced it will dump its Flip video camera. Cisco's reforms are specifically aimed at cutting down its bureaucracy. To this effect, Cisco will eliminate a large sales and service unit that focused on fast-growing emerging markets. Many analysts are not convinced that changes in the bureaucratic apparatus alone will be enough for Cisco to reclaim the market position it had just a few years ago. Its competitors have grown stronger, above all Hewlett-Packard HPQ and Juniper Networks JNPR. One specific area where Cisco has fallen behind its rivals is in manageability. While Cisco sells several lines of switches, which run on different operating systems, HP and Juniper offer their customers one piece of software for managing all their switches. As a result, companies operating on HP or Juniper switches and software need to spend less time training its IT staff. Investors will be encouraged by Cisco's recent announcement that it is teaming up with Xerox XRX to provide cloud computing and print products for its corporate clients. Cisco's future remains uncertain, however, best summed by a wide spectrum of ratings it currently has on its shares. Twenty four rating agencies currently have a Buy or Strong Buy on Cisco, while 20 have a hold. Four rating agencies believe its share will Underperform, however. In yesterday's trading, Cisco's shares were up 0.23% to close the day at $17.60. In today's pre-trading session, its shares added 0.06% more to its value and are currently trading at $17.61.