Cisco Systems Inc. (Nasdaq: CSCO) shares sagged in early after-hours trading after the company's first-quarter earnings didn't match investor expectations.

For its first quarter, which ended October 30, Cisco reported net income of $1.4 billion, or 21 cents per share, on revenues of $6 billion, compared with net income of $1.4 billion, 20 cents per share, on revenues of $5.9 billion for the previous quarter.

For its first quarter last year, Cisco reported net income of $1.1 billion, 15 cents per share, on revenues of $5.1 billion.

Taking away the roundoff factor, Cisco's revenues were $5.97 billion, barely missing analysts' expectations of $6.02 billion. More important, net income of 21 cents per share matched analysts' average estimates as reported by Reuters Research -- but investors have grown accustomed to Cisco beating estimates by a penny.

Not surprisingly, Cisco stock took an immediate turn south in after-hours trading. Early trades were down as much as 51 cents (3%) from today's closing price of $19.75. It probably doesn't help that Cisco's stock had run up recently, increasing 9 percent since October 25.

Cisco had warned that the first quarter ending October 27 would be weak, with revenues growing by 2 percent at most (see Cisco's Q4 Not All Smiles).

Chambers added that second-quarter revenues would be up just 1 to 3 percent, or $6.03 billion to $6.15 billion. Prior to today's earnings announcement, analysts were anticipating $6.21 billion in revenues for the January quarter, according to Reuters.

The guidance percentages didn't surprise everyone, however. Analyst Mark Sue of RBC Capital Markets had predicted Cisco's "1-to-3 percent" guidance range this morning, in a note previewing Cisco's call.

Cisco did drop some glum notes during the call. The book-to-bill ratio for Cisco's first quarter was less than 1.0, an indication that orders slowed down. Chambers also noted "a lot of lumpiness in our router business," citing possible reasons including increased Asian competition and the introduction of new products including the CRS-1 core router (see Cisco Unveils the HFR).

Cisco's board also approved a $10 billion addition to the company's stock buyback program, which has been ongoing since 2001. The buyback program now measures $25 billion total, about $15 million of which remains unspent.

— Craig Matsumoto, Senior Editor, Light Reading

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