Shares of Cisco sink 17% on outlook

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."