Shares of Cisco sink 17% on outlook

By David Goldman, staff writer


NEW YORK (CNNMoney.com) -- Cisco Systems Inc. reported a quarterly profit and sales Wednesday that beat Wall Street's forecasts, but a cautious outlook sent shares plummeting.

Shares of Cisco (CSCO, Fortune 500) fell 17% in early morning trading on Thursday.

On a conference call with analysts, Cisco CEO John Chambers said that Cisco expects its revenue will grow by only 3% to 5% in the current quarter, compared to last year. For 2011, the company expects sales growth of 9% to 12%.

Citing weakness in the company's set-top cable box, consumer and public sector businesses, the ever-cautious Chambers continued to call the economic environment "challenging." He also said that businesses' capital spending has slowed in recent months.

But he sees that that weakness as more of a blip than a long-term trend. He expects sales to pick up soon, with revenue growth returning to Cisco's typical 12% to 17% "in the not-to-distant future."

Still, the San Jose, Calif.-based company said its most recent quarter, the first of its fiscal year, was quite successful. Net income rose to $1.9 billion, or 34 cents per share, in the quarter ended Oct. 31. That's up 8% from a year earlier. The results included one-time charges of 8 cents per share; without the charges, Cisco earned 42 cents per share.

Analysts polled by Thomson Reuters, who typically exclude one-time items from their estimates, expected earnings of 40 cents per share.

Sales rose 19% to $10.8 billion, edging past analysts' forecasts of $10.7 billion.

Cisco has lately found new rivals entering the networking scene, like Hewlett-Packard and IBM, which have added new services to become one-stop shops for technology customers. To keep up, Cisco is transitioning from the world's largest networking provider to a broader-based IT supplier, adding new consumer products to its lineup.

"We believe our vision of how the industry will evolve and strategy to lead this industry is gaining more momentum," Chambers said on the call. "Our ability to enter new markets, from cloud to video mobility to home, is gaining speed and scale." To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,035.71 -35.51 -0.21%
Nasdaq 4,491.11 -14.74 -0.33%
S&P 500 1,970.76 -7.04 -0.36%
Treasuries 2.49 -0.01 -0.20%
Data as of 2:02pm ET
Company Price Change % Change
Ford Motor Co 14.73 -0.38 -2.52%
eBay Inc 56.78 4.12 7.82%
Bank of America Corp... 17.01 0.00 0.00%
Apple Inc 100.72 0.61 0.61%
Facebook Inc 78.91 -0.09 -0.11%
Data as of 1:47pm ET

Sections

CNNMoney's Italian-American investing correspondents did a taste test of Olive Garden's food. They agree with hedge fund Starboard: It's not very appetizing. More

Even limited air operations could cost up to $4 billion a year, says a think tank, while large ground forces could cost $1.8 billion a month. More

On Wednesday, 17% of First Green Bank's 66 employees will get a raise under the company's new "living wage" program. The guarantee: At least about $30,000 a year. More

This mom of four only makes $29,000 a year and is losing $400 a month because the state is garnishing her paycheck over a debt. Now she is about to be evicted from her apartment. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.