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Cisco's Quarter Forecast Chills Tech Market

By Reuters  |  Posted 2010-11-10 Email Print this article Print
 
 
 
 
 
 
 

Cisco's quarter earnings call set the stage for a dismal revenue outlook that stunned analysts who had expected a recovery in tech spending.

NEW YORK, Nov 10 (Reuters) - Top network equipment maker Cisco Systems Inc (NASDAQ:CSCO) gave a dismal revenue outlook, stunning investors who had hoped to see proof of a recovery in technology spending, and sending major tech stocks tumbling after-hours on Wednesday.

Forecasts for quarterly and yearly revenue fell far short of Wall Street's expectations, a big disappointment for a company known for solid management and seen as a top beneficiary of the surge in global wireless and Internet traffic.

"It was a surprising guide down," said Jefferies & Co analyst William Choi. "They're a well run company, well respected, they typically set guidance and meet. For them to guide down like this is puzzling."

John Chambers, one of the longest-serving CEOs in Silicon Valley whose views on economic trends are well regarded, cautioned of "short-term challenges" in Europe and public sector spending, as well as among its most important customer segment: service providers.

"First of all, our view on this guidance is, we are disappointed," he said.

Chambers forecast revenue growth of 9-12 percent in fiscal 2011, well below the 13.1 percent analysts had expected on average.

A projection for 3-5 percent revenue growth in the fiscal second quarter -- the current period -- also fell far short of Wall Street's expectations for 13 percent.

The outlook from the tech-sector bellwether sent shares in fellow industry heavyweights down in extended trading. Microsoft Corp (NASDAQ:MSFT) fell 1.6 percent, IBM (NYSE:IBM) slipped 1.2 percent, and Intel Corp (NASDAQ:INTC) dropped 2.1 percent.

"We are obviously not projecting growth as fast as we would like over the next several quarters," Chambers told analysts on a conference call. He said it "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."

 
 
 
 
 
 
 
 
 
























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