Cisco Systems (Nasdaq:CSCO) and China Market

Finishing up a tour of China's tech industry, Ticonderoga Securities ended with a look at several companies, most importantly Cisco Systems (Nasdaq:CSCO), which is optimistic about their opportunities there.

Ticonderoga said, "Our Final Day in China. Today we met with Cisco Systems (Buy-rated), TPV Holdings, GOME and China TechFaith (Nasdaq:CNTF)(NR)...Our meeting with Cisco highlighted the company's continued optimism surrounding growth opportunities in the China market and the company's Smart+Connected Community Solution. Cisco generates approximately 3-4% of sales in China by our estimates, with 15 offices and 4,000 employees. Cisco highlighted success in the financial vertical, and certain customers are willing to pay a premium for Cisco's products. Additionally, Cisco discussed share gains in low-end networking in China over the past year, and total sales have grown at approximately 2x the China networking market over the past year. Although we believe Cisco will compete more with Huawei in the future, the company could potentially partner with ZTE (763 HK, HK$30.80, NR).

"LCD Business Still in the Doldrums. Our meeting with TPV highlighted muted trends in the LCD supply chain in both the PC monitors and LCD TVs. TPV is the #1 PC monitor maker in the world and #3 in the LCD TV market. We sensed PC OEMs continued to reduce forecasts. Overall, customers remain cautious on 2011. Keep in mind, during our visit to TPV last December, demand had picked up meaningfully, and this foreshadowed strength for the industry in 1Q10. However, this is clearly not the case this December. We were told LCD panel prices will decline for both PC monitors and LCD TVs during the March quarter. With these trends in mind, we continue to remain unexcited by our LCD coverage universe, which includes AU Optronics (NYSE:AUO)(Neutral), LG Display (NYSE:LPL)(Sell) and Corning (NYSE:GLW)(Sell).

"China Showing Retail Strength Except for LCD TVs...China TechFaith Benefits From the Smartphone Ramp."

Cisco closed Friday at $19.70, level from the prior session. China TechFaith closed at $3.86, down $0.02, or 0.52 percent. AU Optronics ended the week at $10.01, down $0.09, or 0.89 percent. LG Display closed at $18.03, up $0.04, or 0.22 percent. Corning was down to $18.83, dropping $0.17, or 0.89 percent.