The headlines were solid but the underlying dynamic of decelerating order growth across a broader spectrum of markets points to a “U” verus a “V” shaped recovery, which likely has the shares giving up some of their 14% gain in recent weeks. However, as per our upgrade in mid-February the July quarter looks poised to be the fundeamental trough with a gradual recovery likely commencing in October.
The good news is that Citi thinks the back half of the calendar year looks pretty good:
Back half of the calendar year looks favourable with easing compares and seasonal tailwinds together with headcount moderation and a margin-rich product cycle gaining traction. Moreover, as investors begin to reposition for the “unwinding” of the currency trade for calendar 2009 we view Cisco as a likely recipient of incremental money flow.