Cisco slips on Humble Forecast

Cisco Systems Inc., the biggest maker of computer-networking equipment posted a rise quarterly profit owing to solid growth in sales. But the shares dropped after the company made a humble forecast.

Chief Executive John Chambers yesterday said revenue in the third quarter will grow 10 per cent, below the analysts’ estimate of 15 per cent. The company’s prediction would translate into revenue of about $9.8 billion, lower than the $ 10.19 billion expected by analysts, for the three months ending in April.

It is for the second consecutive time, Cisco’s forecast has disappointed the investors and ignited fears that the high-tech sector may be hit by the economic slowdown in the U.S. since the leading network equipment maker is seen as an indicator for tech spending.

Last quarter, Chambers was wary of results, the revelation of which, led to a sharp sell off that has cut Cisco's shares by 30% and helped build negative sentiment around technology stocks, leading the NASDAQ to give up all of its gains made in the last year.

However, this time around Chambers was a little more cautious in making comments and tried to remain upbeat. "I'm personally very optimistic that this market transition provides opportunities for us and will be relatively short-term in is implications," Chambers said, adding that the company planned to use the slowdown as an opportunity "to be aggressive about moving into new market adjacencies," implying a potential upswing in acquisition activity.

For the quarter ended Jan. 26, Cisco reported net income of $2.1 billion, or 33 cents per share, compared with net income of $1.9 billion, or 31 cents per share, for the same period last year.

Revenue grew nearly 17% to $9.8 billion from $8.4 billion last year, in line with the analysts’ expectations.

San Jose, California – based Cisco went down $1.08 to $22 at 9:32 a.m. New York time in Nasdaq Stock Market trading. The stock had peaked above the $34 mark in early November before the last earnings report, which led to the first major decline in in three years.