Foolish Forecast: Crusher Cisco

Tonight, we'll get the latest financial report from networking stalwart Cisco Systems (Nasdaq: CSCO  ) . Let's plug in to its jungle telegraph network to get a feel for what's to come.

What analysts say:

• Buy, sell, or waffle? Out of 33 Wall Street analysts following Cisco, 23 rate the stock a buy, nine are holding, and one guy wants to sell. In our Motley Fool CAPS community, it's a four-star stock, thanks to a community opinion that's 93% bullish.
• Revenues. The company should turn in $8.3 billion in sales, according to the analysts. That's 24.9% above the year-ago period. It's also at the top of management's $8.2 billion to $8.3 billion sales guidance.
• Earnings. $0.31 per share would satisfy the average analyst, up from $0.26 last year.

What management says:
In the last earnings conference call, CEO John Chambers said that everything is pretty much working out as planned: "Our vision of how the industry was going to evolve appears to be playing out very much as we expected. Our strategy is also achieving the benefits to both Cisco and our customers that we thought were possible. Finally, our execution is on target in terms of results as measured by customer partnerships perspective, market share gain, and share of our customers' total communications and IT expenditures, as the network truly becomes a platform for delivering these capabilities."

What management does:
Gross margins are declining as more quarters impacted by the Scientific-Atlanta acquisition roll into these trailing 12-month numbers, and the operating costs are increasing about as fast as sales. You can see the same story illustrated another way by comparing the Scientific-Atlanta sales boost to the impaired bottom-line growth in the same periods.

Margins	7/2005	10/2005	1/2006	4/2006	7/2006	10/2006
Gross	67.2%	67.5%	67.7%	67.3%	66.4%	65.5%
Operating	30.0%	29.9%	29.9%	29.4%	28.8%	28.2%
Net	23.1%	22.1%	21.5%	20.6%	19.6%	19.7%
FCF/Revenue	33.3%	33.3%	32.3%	32.6%	30.4%	31.7%

Y-O-Y Growth	7/2005	10/2005	1/2006	4/2006	7/2006	10/2006
Revenue	12.5%	12.5%	10.0%	12.2%	14.9%	18.7%
Earnings	15.6%	15.6%	3.6%	(0.1%)	(2.8%)	5.7%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Cisco is the clear leader in its core computer networking market, with strong leadership, a long-term mindset, and an aptitude for making its acquisitions count. The company is on a roll, and has exceeded Street expectations in each of the last five quarters. However, if the top-line expectation is correct, the bottom-line target would mean a significantly improved net margin -- about 22.7%, compared to 20.7% for the year-ago quarter. Keeping that upside surprise streak alive will take some doing, considering the Scientific-Atlanta effect.

Competitors:

• Dell (Nasdaq: DELL  )
• Nuance Communications (Nasdaq: NUAN  )
• Nortel Networks (NYSE: NT  )
• Motorola (NYSE: MOT  )
• Arris Group (Nasdaq: ARRS  )
• Hewlett-Packard (NYSE: HPQ  )

Dell is both a Motley Fool Stock Advisor pick and a Motley Fool Inside Value selection, while Nuance is a Motley Fool Hidden Gems diamond in the rough. Find out more with a couple of free 30-day newsletter subscriptions.

Fool contributor Anders Bylund holds no position in any of the companies discussed here, but he'd buy Cisco if he could only stop writing about it for a while. Fat chance! You can check out Anders' holdings if you like, and Foolish disclosure is always connected.