Cisco Sounds Warning Bells
The news, delivered during today's second-quarter earnings call with analysts, could add another lodestone to a sector that's already been hammered by Wall Street so far this year.
CEO John Chambers noted on the call that Cisco's product order growth dipped to less than 10 percent in January -- adding that it might stay that way for a while.
"Given the uncertainty of the global financial markets and the cautiousness we are seeing from customers and some of our peers, we believe that the proper approach to guidance... is to assume that January's order growth rates may continue over the next several months," Chambers said.
[Ed. note: Nnnoooooooooo!!!!!]
That means Cisco's forecast for the third quarter, which ends in April, is for revenue growth of 10 percent from the previous year, implying sales of $9.75 billion. Analysts polled by Reuters Research were expecting $10.2 billion for the quarter.
Cisco shares were down $1.66 (7.2%) at $21.42 in after-hours trading.
The shares had been inching upward as the earnings call began and were up $0.84 (3.6%) to $23.92 in the minutes before Chambers's glum forecast.
Cisco gave hints of a slowdown with its first-quarter earnings, saying it saw sales weakening in its largest U.S. enterprise customers. But that trend didn't resurface in subsequent earnings from companies like Juniper Networks Inc. (NYSE: JNPR). (See Investors Frown on Cisco Q1 and Juniper Scores in Q4.)
Cisco continues to say its long-term revenue growth will be 12 percent to 17 percent. But whether a return to that level takes "one or two quarters, or a little longer, is yet to be determined," Chambers said.
It's primarily the United States and European customers that are becoming "overly cautious," leading to the slowdown, Chambers said. Much of that is on the enterprise side, though; the service provider business is where Cisco is feeling "most comfortable," he said.
For its second quarter, which ended January 26, Cisco reported revenues of $9.83 billion and net income of $2.06 billion, or 33 cents per share, compared with first-quarter revenues of $9.56 billion and net income of $2.21 billion, 35 cents per share.
For its second quarter a year ago, Cisco reported revenues of $8.44 billion and net income of $1.92 billion, 31 cents per share.
Cisco's pro forma earnings of 38 cents per share exactly met the consensus analysis tallied by Reuters.
— Craig Matsumoto, West Coast Editor, Light Reading