Analysts: Cisco set for a recovery

Thu, 07/23/2009 - 8:10am
The Associated Press

NEW YORK (AP) – Demand looks to be recovering for Cisco Systems Inc., the world's largest provider of computer-networking equipment, according to two analysts.

Kenneth Muth, of Robert W. Baird, upgraded Cisco to "Outperform" from "Neutral" in a note to investors Wednesday, saying checks with 90 customers "show a marked improvement in sentiment."

"While not suggesting a dramatic near-term rebound, we believe the improved results indicate more upside than downside to estimates," Muth said. "And we see several leading indicators setting the stage for more meaningful recovery down the road."

He noted three developments. First, large customers have become more positive about demand than small ones, "the opposite of what occurred entering the downturn."

Second, conditions are improving in North America, the first region into the slump.

And finally, there has been "meaningful improvement" for switching products, Cisco's biggest segment.

Oppenheimer analyst Ittai Kidron offered an upbeat take on Cisco, as well. In a client note Wednesday, he raised his price target to $25 from $24, reiterating an "Outperform" rating.

He said his own checks "suggest Cisco's sales are tracking in line to slightly ahead of expectations."

Investors largely shrugged the good news off, however. Cisco's stock edged 17 cents lower to $21.42 in afternoon trading. The stock is up 32 percent year-to-date.

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