FBR's Ives Believes Cisco Earnings Will Be 'Another Barometer For Tech Spending' Into '16

• Cisco Systems, Inc. CSCO shares have lost 4 percent in the last 6 months, amid some volatility.
• FBR & Co’s Daniel H. Ives said that budget dollars continued to shift away from traditional IT players, and Cisco’s 1Q results would be indicative of tech spending into yearend 2015 and 2016.

Cisco is scheduled to report its 1Q16 earnings on November 12. The Street estimates for the company’s total revenue and pro forma EPS are $12.65 billion and $0.56, respectively.

Tech investors are “looking for signs of traction around the core networking business, new strategic initiatives, China enterprise comments, and thoughts on the overall IT spending environment, as the company represents a key barometer for the tech space,” analyst Daniel Ives said.

Growth at Cisco and several of its mature tech peers has been very slow over the past year, since these large traditional IT vendors face “an Everest-like climb in their quest for success in this ever-changing IT landscape,” Ives commented. These companies are trying to figure out a way to revive growth around cloud, big data, cybersecurity, and IOT [Internet of Things].

“For CSCO tomorrow, tech investors will be laser focused on management’s thoughts on the overall IT spending environment, cybersecurity initiatives/ recent deals, the recently announced Ericsson partnership, China growth strategy, and importantly comments around its M&A strategy and how this could affect the rest of the space in 2016 and beyond,” the analyst mentioned.

This quarter witnessed a continued shift in budget dollars toward next-generation vendors and away from traditional IT players, like Cisco. Ives said his favorite tech names into yearend were Palo Alto Networks Inc PANW, Splunk Inc SPLK, Microsoft Corporation MSFT, Qlik Technologies Inc QLIK, Checkpoint Systems, Inc. CKP and Proofpoint Inc PFPT.