Cisco Quarter Disappoints, Creates Concern Over Economic RecoveryBy Reuters | Posted 2010-08-12 Email Print
Cisco's CEO John Chambers warned of "unusual uncertainty" in the economy and offered a revenue forecast that disappointed analysts. Chambers noted that customers are seeing mixed signals in the market, but added that sales gained strength in the last month of the quarter.
NEW YORK, Aug 11 (Reuters) - Cisco Systems Inc (NASDAQ:CSCO) CEO John Chambers warned of "unusual uncertainty" in the economy and forecast revenue that missed Wall Street targets, sending its shares plummeting and raising fears that a nascent recovery in technology spending could be derailed.
The cautious comments from the man often known as Silicon Valley's biggest cheerleader disappointed investors who had expected growing Internet traffic would spur stronger sales of Cisco's network equipment and send a positive signal to the broader technology sector.
"We are seeing a large number of mixed signals in both the market and from our customers' expectations, and we think the words 'unusual uncertainty' are an accurate description of what is occurring," Chambers told analysts on Wednesday.
Shares in the networking giant and industry bellwether dived 8 percent after-hours, weighing on other tech names. Rival Juniper Networks (NYSE:JNPR) slid 3 percent in extended trading, while International Business Machines Corp (NYSE:IBM) was down over 1 percent. EMC Corp (NYSE:EMC) fell over 2 percent.
Cisco is expected to depress Wall Street on Thursday, with Standard & Poor's 500 futures SPc1 down 0.4 percent and Nasdaq futures NDc1 off 1.2 percent.
Chambers said orders slowed in late June to early July as worries mounted about debt problems in Europe, but strengthened at the very end of the quarter that ended July 31. He added that he did not expect a double-dip recession.
"He certainly sent investors mixed signals. But overall, it looks like orders ramped up towards the end of the quarter but weren't strong enough to give the guidance that people were looking for," said Bill Choi, analyst at Jefferies & Co.
Cisco forecast its revenue this quarter would grow 18 percent to 20 percent from a year earlier, while the average analyst estimate had been for 21 percent growth to $10.95 billion.
Revenue in its fiscal fourth quarter ended July 31 was also slightly below expectations at $10.8 billion, above 27 percent from a year earlier but still slightly below the average analyst forecast of $10.9 billion, according to Thomson Reuters I/B/E/S.