Cisco's January Guidance Could Overshadow Q1 Results

Analysts are more concerned about Cisco Systems, Inc.'s CSCO future than the current quarter.

"We're not too worried about the October quarter, but I am a little concerned about the guidance they made for January," Raymond James analyst Simon Leopold told Benzinga.

Leopold is also concerned about the European weakness, "particularly with the exchange rates representing a headwind."

"Emerging markets are a little dicey," Leopold added. "I don't know that that's different. Service provider, clearly a challenge. And I think in January Cisco will face a difficult sequential comparison in U.S. federal because it sounds like that vertical was pretty good in October."

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'Okay' Quarter

Needham analyst Alex Henderson thinks that Cisco's Q1 FY 2015 results will be "okay" at best.

"I don't think it's likely to give an upside surprise," Henderson told Benzinga. "It's more likely to be just barely okay. But I think the guidance is going to be very rough."

Henderson said there are several reasons for that.

"The first is they're heavily skewed to emerging markets and it's pretty clear their emerging markets have gotten substantially tougher since the last time they did an earnings call," he continued. "It's also pretty clear that service provider spending has been pulled in quite sharply. And we're still seeing erosion in the router market."

Despite these issues, Henderson believes the company is accelerating its cost-cutting measures with a "constant stream of increased restructuring in staff reduction" over the last three months.

"I think what's likely to happen is they're likely to pull an in-line-ish quarter with a really soft guide," he added.

2015 And Beyond

Against that backdrop, Henderson thinks it's going to be "really tough for [Cisco] to pull much out of the hat."

"They have rolled out the ACI and the new Nexus 9000 and hopefully there's some improvement in that," said Henderson. "The comps are pretty easy through the spring of next year against that. But I think the macro backdrop is probably the bigger factor."

Leopold has much higher hopes for Cisco. He thinks the Nexus 9000 is starting to gain traction.

"If I'm wrong about the January guidance, that's probably the big wild card that's going to help them out," he said.

Cisco reports its Q1 FY 2015 results after the market close on Wednesday, November 12.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.