This post was originally published on this site
Cisco Systems Inc. issued a disappointing forecast for a second consecutive quarter Wednesday, sending shares down and increasing fears of a slowdown in global tech spending.
Cisco CSCO, +0.19% projected that revenue would fall 3% to 5% year-over-year in its fiscal second quarter, and guided for a slight profit increase to adjusted earnings of 75 cents to 77 cents a share. Analysts surveyed by FactSet had expected adjusted earnings of 79 cents a share and revenue of $12.75 billion, which would be a 2.4% increase from the year-ago quarter.
The company reported fiscal first-quarter net income of $2.93 billion, or 68 cents a share, compared with $3.55 billion, or 77 cents a share, in the year-ago period. Adjusted earnings were 84 cents a share, up from 75 cents a share last year. Revenue rose to $13.16 billion from $13.07 billion in the year-ago quarter. Analysts on average had forecast earnings of 81 cents a share on revenue of $13.08 billion, according to FactSet.
Cisco shares dropped 4.6% after hours, following a 0.2% rise in the regular session to close at $48.46.
Chief Executive Chuck Robbins said that the problems that caused concern in the last earnings report increased in the past three months, with demand weakness spreading from service-provider offering and emerging markets to larger businesses, including enterprise and commercial.
“I did say that we began to see some early signs of some macro impact toward the end of Q4, and then we just basically saw that continue throughout the quarter and obviously the entire quarter was worse than we had expected when we began, and it was fairly broad-based,” Robbins said in a conference call Wednesday afternoon.
“It feels like there’s a bit of a pause,” Robbins said later in the call. “We saw things like conversion rates on our pipeline were lower than normal, which says things didn’t close the way we have historically seen it. … It was really just stuff slipping. We saw some large deals get done but got done smaller.”
As of the close, Cisco shares were up nearly 12% this year, as the S&P 500 index SPX, +0.07% has gained 23% and the Dow Jones Industrial Average DJIA, +0.33% — which counts Cisco as a component — has increased 19%. Of the 28 analysts who cover Cisco, 16 have an overweight or buy rating on the stock and 12 have a hold ratings, with an average price of $54.91.
