On Wednesday, Cisco Systems projected fiscal third-quarter revenues well below what analysts expected. The company said its U.S. and European customers are being increasingly cautious, and did not provide a view for fiscal 2008 due to uncertainty.
Cisco reported second-quarter net sales of $9.8 billion, a 16.5 percent boost. For the fiscal second quarter that ended Jan. 25, Cisco said it generated a $2.1 billion profit, or 33 cents per share, compared with $1.9 billion, or 31 cents a share, in the year-ago quarter.
“Cisco delivered another solid quarter with strong revenue and order growth driven by a broad base of geographies, products, services and customer markets,” Cisco Chairman and CEO John Chambers said. “Cisco’s ability to understand market transitions, whether technology or business model-based, continues to be a key contributing factor to our long-term success.”
Gloom Affects Stock
But Cisco’s forecast of 10 percent sales growth for its third fiscal quarter affected its stock. Wall Street analysts had projected 15 percent growth and Cisco’s shares dropped in early trading, but recovered.
“Cisco guided [itself] to 10 percent growth. So think about what that means,” said Zeus Kerravala, a vice president at Yankee Group. “It’s likely that Cisco’s advanced technologies will grow more than 10 percent and the emerging markets will grow more than 10 percent — but the core of what it does, routing and switching in the U.S. enterprise, is likely to be far below that to average only 10 percent. That’s a staggering admission.”
What’s Cisco’s Problem?
Some have speculated Cisco’s gloomy report bodes poorly for the tech industry at large, but others see a different picture. As the tech market goes, so goes Cisco, Kerravala said, but the converse is not true. Reviewing the quarterly earnings reports of smaller tech companies often paints a different picture.
The Yankee Group reports that CIOs are…