Cisco surprises with lower outlook

Robert Clark
11 Nov 2010

Investors have sharply marked down Cisco stock after the company cut its guidance because of weakening demand.

It announced an 8% rise in earnings, but said it expected sales growth of 3% to 5% in the current quarter – well below analysts’ projections of 13%, Reuters reported.

CEO John Chambers said Cisco had already seen weaker spending in key sectors, with orders from US government agencies down 25% year-on-year and cable operator spending 35% lower.

“We have a couple of pockets that we have to fly through,” Chambers said.

“We are obviously not projecting growth as fast as we would like over the next several quarters,” Reuters quoted Chambers saying on a conference call.

The result “reflects, in our opinion, the reality in public sector spending, some challenges in parts of our service provider market, and one or two areas we should improve our execution.”

“The big question is whether this is Cisco-specific or whether there is something about the market that we should be more concerned about,” Bill Choi, an analyst with Jefferies & Company, told theNew York Times.

The surprise warning knocked Cisco’s Nasdaq stock down 12.62% in after-hours trading. Other tech heavyweights also took a hit, with Microsoft off 1.6%, IBM 1.2% and Intel 2.1%.

Cisco posted net income for the quarter of $1.9 billion after raising revenue 19.2% to $10.75 billion.

Sales of Cisco’s traditional switch and router products increased 25% and 13% respectively, while its new products group – such as security, connected home and wireless gear – accounted for 29% of total sales.

MORE ARTICLES ON: Cisco, Earnings, IBM, Intel, Microsoft, Outlook

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