Cisco warns of slowing growth

Cisco CEO John Chambers told investors that Cisco's sales would be lower than expected in its next quarter, sending the stock tumbling.

NEW YORK (CNNMoney.com) -- Cisco Systems posted fiscal second-quarter sales and earnings Wednesday that met Wall Street's estimates. But the leading network equipment maker warned revenue would only grow about 10% in its next quarter, below expectations of 15%.

Shares of Cisco (CSCO, Fortune 500) plunged more than 7% in after-hours trading after finishing the day largely unchanged in regular activity on the Nasdaq.

Second-quarter sales came in at $9.8 billion, up 16.5% from the same period last year and in line with analysts' estimates of $9.79 billion, according to Thomson First Call.

The company reported net income of $2.1 billion, or 33 cents a share, up 7.2% from the year-ago quarter. Non-GAAP earnings, which exclude certain gains and charges, came in at $2.4 billion, or 38 cents a share, up 13.8% from the same period last year and meeting the 38 cents per share analysts had projected.

"Cisco delivered another solid quarter with strong revenue and order growth driven by a broad base of geographies, products, services and customer markets," said Cisco chief executive John Chambers in a written statement.

Chambers also expressed optimism about Cisco's future, saying the company was able to "act upon key market transitions."

"As we enter the second half of the fiscal year, our innovation pipeline is in excellent shape, our balanced product momentum across core and advanced technologies continues to be solid, and execution against our long-term strategy remains unwavering," he said.

But during a conference call with analysts, Chambers said revenue growth in January was "less than expected" at just 10%, and that he expects next quarter's revenue to grow by approximately 10% as well, below analysts' estimates of 15% and the company's long-term target of 12% to 17% growth.

This was the first time in five years that Cisco had missed a January forecast, said Chambers.

He added that he didn't know whether it would take Cisco "one or two quarters or a little longer" to return to its longer-term growth estimates.

According to the company, orders from financial accounts were actually up 21% this past quarter, while demand from its retail and transportation customers were softer than expected. Chambers said this could have been due to "confidence issues with many CEOs" and a general "pessimism that exists in the market."

Chambers also said that the popularity of Web 2.0 applications and online video continues to drive demand for Cisco's products and that emerging markets look "very, very solid." In the second quarter, orders from India and China were up by 50% and 30%, respectively.

The San Jose, Calif.-based company primarily sells routers and switches to large companies. For this reason, Cisco's results are widely viewed as a barometer for corporate tech spending.

But Cisco has diversified in recent years. It moved into the consumer market thanks to its acquisition of companies like Linksys and Scientific Atlanta, which by make Wi-Fi equipment for the home and cable set-top boxes. Cisco also bought online conferencing firm WebEx for $3.2 billion last year.