NEW YORK, Nov 18 (Reuters) – Cisco Systems Inc (NASDAQ:CSCO) Chief Executive John Chambers repeatedly apologized to shareholders on Thursday for a weak sales outlook last week that sparked a sell-off in the company’s shares.
He also said the network equipment maker was unlikely to lose market share in its core business of routing and switching, although he noted strong competition and named Huawei Technologies Co Ltd as its biggest rival.
Chambers, one of Silicon Valley’s longest-serving chief executives, said the company was caught off guard by a sudden drop in orders from public sector clients in the last few weeks of its fiscal first quarter that ended Oct. 30.
"I hate being unpredictable, and this clearly was a disappointment for us," he told an annual meeting of shareholders, held in Santa Clara, California and webcast live.
"I am sorry … I’m really disappointed," he said. "I consider both transparency and consistency very important. We won’t surprise you very often, and I apologize that we did."
Shareholders applauded after those final remarks. Cisco shares closed up 1.06 percent at $19.61 on Thursday.
But the shares are still down around 20 percent from the middle of last week, when the company forecast revenue growth of 9 to 12 percent in fiscal 2011, well below the 13 percent analysts had expected. A projection for 3 to 5 percent revenue growth in the second quarter also fell far short of Wall Street’s expectations.
Chambers said conditions were mixed in Europe, where debt-burdened governments have been cutting back on spending. He said U.S. federal spending was "great" but that local and state government spending had fallen off a cliff.
Some analysts have said the slowdown raises concerns that the company is neglecting its traditional bread-and-butter business of selling routing and switching as it expands to new products like video cameras and computer servers.
Asked about the possibility of losing market share in its core business, Chambers responded: "I’d say it is unlikely." He acknowledged, however, that the company faces strong competition, particularly from Chinese communications equipment maker Huawei. (Reporting by Ritsuko Ando, editing by Gerald E. McCormick and Carol Bishopric)