Last updated: August 12, 2010 12:21 am

Cisco shares tumble after results

Reduced technology spending by big companies around the globe led Cisco Systems, the world’s largest maker of networking equipment, to miss analyst expectations as it reported fourth quarter and annual results.

Shares in the bellwether tech group fell more than 8 per cent in after-hours trading.

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Sales were $10.8bn for the quarter, a record for the company and a 27 per cent increase from the same period a year earlier.

But analysts had expected sales of $10.9bn, and viewed the results as further evidence that the global economic recovery was slowing down.

“We are seeing a large number of mixed signals in both the market and from our customers’ expectations,” said John Chambers, chief executive.

“We think the words ‘unusual uncertainty’ are an accurate description of what is occurring.”

Lower than expected sales from Cisco indicate that enterprise spending is contracting after surprisingly brisk growth this year.

Cisco’s results follow disappointing figures from IBM and Texas Instruments last month.

Cisco reports results a month later than most other technology companies, and as a result is considered a bellwether for the industry and the broader economy.

Wednesday’s results are the first that cover the entire month of July, and are likely to send a chill through Wall Street. Mr Chambers said that Cisco and its customers, which include most of the world’s governments and largest companies, remain cautious about the pace of the global economic recovery.

“The Federal Reserve’s comments yesterday that the pace and output of the recovery has slowed in recent months, and that the recovery is likely to be more modest in the near term than had been anticipated just a few months ago, are comments that most of our large customers that I have talked with recently would agree with,” Mr Chambers said.

This is the third straight quarter of growth for Cisco after revenue fell for four consecutive quarters during the recession.

Net income rose 79 per cent from $1.1bn to $1.9bn in the quarter, and net income for the full fiscal year was up 27 per cent to $7.8bn.

The company, based in San Jose, California, is growing fast thanks to international demand from businesses handling record volumes of internet and video traffic.

“Whether the global economy continues to show mixed signals or not, the strength of our financial model and profit generation serves us well,” said Mr Chambers.

But Cisco warned that there are “some challenges that are contributing to an unusual amount of conservatism and even caution” as it looks ahead. In spite of these concerns, Mr Chambers still predicted revenue growth of 18 per cent next quarter.

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