Cisco Quarter Pressured by HP Competition, Other Rivals

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Concern over public-sector spending cuts and increased competition from rivals such as HP are tempering expectations for Cisco's quarter results, due this week.

NEW YORK, Feb 4 (Reuters) - No longer Wall Street's top over-achiever, network equipment maker Cisco Systems Inc (NASDAQ:CSCO) must persuade wary investors it can fight off rivals such as Hewlett-Packard Co (NYSE:HPQ) and soothe concerns about public sector spending cuts.

Although most investors forecast modest year-over-year revenue growth, some said they were approaching Cisco's quarterly report next Wednesday with caution after surprisingly weak forecasts in the past two quarters.

A high dividend payment or a confident outlook from Chief Executive John Chambers could prop up shares of the world's top seller of routers and switches. But most analysts said concerns over U.S. and European debt as well as the uncertain global economy would limit any gains.

"We have pretty low expectations for Cisco," said Channing Smith, managing director of Capital Advisors. "When a company stubs its toes with bad quarters, investors should expect the trend will easily take a couple more quarters to reverse."

Analysts on average expect fiscal second-quarter revenue of around $10.23 billion, up 4 percent year-over-year but down 5 percent sequentially, according to Thomson Reuters I/B/E/S.

They also forecast third-quarter revenue to rise 5 percent from a year earlier to $10.84 billion, with the main focus on Chambers' comments on the economy and technology spending.

Cisco's global operations and a clientele spanning businesses and government agencies has made it one of the technology sector's bellwethers.

The management team's record of controlling costs and growing the business through acquisitions also made them a darling of tech investors over the years. But a fragile global economy has proven more damaging than initially expected.

In the previous quarter Chambers gave a dismal outlook and warned of a sharp fall in orders from the public sector.

"I'm just looking for stabilization, an indication from the company that they've got a handle on demand, and hopefully more positive signs from the public sector," Joel Achramowicz, analyst at Blaylock Robert Van.