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Cisco Shares Fall on Sluggish U.S. Orders

Cisco Systems Inc. shares fell more than 6 percent Thursday amid worry that fluctuations in U.S. business orders are hampering its growth.

The world's largest networking supplier posted first-quarter earnings that beat Wall Street estimates after the markets closed Wednesday. It also reaffirmed its long-term target for a revenue growth rate of 12 to 17 percent and its expectation that sales will grow 16 percent in the second quarter.

But its shares fell $2.12, or 6.5 percent, in morning trading Thursday. Cisco stockholders have still benefited from a rapid run-up in the share price that has created more than $30 billion in shareholder wealth since the start of the year.

"Our business is across every major country in the world, and it's across all product lines, and it's really across all customer segments," Cisco Chief Executive John Chambers said in an interview.

He dismissed concern over orders from large U.S. corporations growing in the mid-single-digit range, down from 20 percent early last year, saying sales to U.S. enterprises make up "only 40 percent of our total U.S. business."

"The other two major U.S. customer segments -- service provider and commercial -- are very strong," Chambers said.

Routers and switches that direct Internet traffic accounted for more than half of Cisco's total sales in the first quarter, with both segments growing steadily over last year -- 18 percent and 8 percent, respectively.

Its fastest growth came in its advanced technologies division, which includes online meeting company WebEx Communications, cable set-top box maker Scientific-Atlanta and the Linksys home networking unit, among other technologies. That division contributed $2.4 billion in sales, a quarter of Cisco's total revenues and 24 percent more than last year.

San Jose-based Cisco is expanding to reap more profits from booming demand for advanced networking gear and other technologies to handle voice, video and data traffic over the Internet.

Recent acquisitions include the $3 billion takeover of WebEx and $7.1 billion purchase of Scientific-Atlanta.

The company reported first-quarter sales and profits Wednesday that surpassed Wall Street's predictions.

Cisco said its net income was $2.2 billion, or 35 cents per share, for the three months ended Oct. 27. That compares with $1.6 billion in profit, or 26 cents per share, in the year-ago period.

Stripping out one-time charges, Cisco earned 40 cents per share, 4 cents more than the average estimate of analysts polled by Thomson Financial.

Cisco's sales in the first quarter were slightly higher than analysts' forecast -- $9.55 billion compared with a prediction of $9.54 billion. Sales were up 17 percent over the $8.2 billion recorded in the same period last year.

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