The VAR Guy

Investors and partners are holding their breath as Cisco Systems prepares to announce quarterly results on February 6. Cisco CEO John Chambers (pictured) spooked investors during the company’s previous quarterly earnings call, when he said enterprise sales felt a bit “lumpy.” The VAR Guy spoke with several Cisco partners ahead of the latest earnings release to gather their expectations.

First, it’s important to note that Wall Street has turned lukewarm on Cisco. Although the company continues to execute on its unified communications strategy and newer Data Center 3.0 push, Chambers also needs to battle CIO and Wall Street concerns about a potentially slowing economy.

Already, Citigroup has slightly trimmed its 2008 earnings estimates for Cisco and Pacific Crest isn’t expecting a blow-out quarter for the company, according to Barron’s financial blog (which is a stellar read, by the way).

Still, Cisco partners aren’t ready to panic. In fact, they sound quite comfortable betting the house on Cisco — regardless of the economy’s status.

During phone chats with The VAR Guy earlier this week, two Cisco partners said they continue to increase their bets on the networking company. In particular, one partner has hired more data center talent to cash in on Cisco’s new Data Center 3.0 initiative. And another partner has overhauled its branding to focus almost entirely on Cisco’s unified communications effort.

Rather than worrying about rival companies and technologies, both partners see the economy as Cisco’s biggest challenge.

One of the partners has been pushing deeper into government and higher-education work, and is not overly pursuing work with Wall Street clientele this year. “You look at what happened to Citigroup with bad housing debt, and you know financial services CIOs are not going to write you big checks this year,” said one partner.

The other partner said he has noticed a few Cisco customers delaying big-ticket projects over the past few weeks. In particularly, he’s worried that Cisco’s high-profile TelePresence efforts will remain beyond the financial reach of most companies until the economy picks up and TelePresence prices come down.

Hedging Your Bet?

While Cisco dominates many sectors of the networking market, some companies have managed to carve out niches for themselves. Three prime examples:

• Annual TelePresence-related sales at LifeSize Communications nearly tripled in 2007, according to the HD video conferencing specialist.
• ShoreTel has quietly developed a healthy VoIP following in the small and midsize markets. Now, the company is integrating its unified communication platforms with third-party applications, such as Microsoft Dynamics.
• Fonality, which specializes in open source IP telephony (based on Asterisk), has inked a potentially lucrative partnership with Dell.

Still, these anecdotes are just that: Small successes that occur in the shadows of a networking giant. Wall Street’s fingers are crossed, hoping Cisco announces strong results after the market closes on February 6. But the smart money seems to suggest that event Cisco is facing its share of economic challenges in the enterprise.

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