NEW YORK (Reuters) - Investors who were shocked by Cisco Systems Inc's (CSCO.O) dire financial outlook in its last quarterly earnings report are bracing for more bad news when the network equipment maker reports results on Wednesday.
Cisco warned on November 13 that revenue would decline as much as 10 percent in its second fiscal quarter ended in January and that it would not resume growth for several quarters.
It blamed weak demand in emerging markets and from service provider customers as well as a backlash against U.S. government spying in China.
Now, investors may face more gloomy predictions when the company reports fiscal second-quarter results after the market closes on Wednesday, according to analysts.
"Expectations are pretty low. I think the company is not going to be upbeat," said Raymond James analyst Simon Leopold. "They'll meet expectations on earnings, they'll tell us the environment is tough and that they're working to restore their growth."
Leopold said that some investors had hoped that the company was being overly cautious when it issued its bleak financial targets in November.
But with few signs of improvement from the broader market, Leopold said that any hopes of a quick turnaround have faded.
"That seemingly conservative guidance seems pretty appropriate," said Leopold, citing broader concerns about weakness in emerging markets and weak reports from other companies with exposure there.
International Business Machines Corp (IBM.N), another U.S. technology bellwether with emerging markets exposure, missed its revenue expectations for the fourth quarter in a row in January, citing weakness in markets such as China.
Wall Street on average expects Cisco to report earnings per share of 37 cents on revenue of $11.027 billion for its fiscal second quarter, according to Thomson Reuters I/B/E/S.
Cantor Fitzgerald analyst Brian Marshall said Cisco's woes could reach a trough in its fiscal third quarter but added that its "outlook remains uncertain."
"We expect emerging market demand to remain challenged in the near-term and the service provider weakness appears to be more of a Cisco-specific issue," White said.
The average analyst estimate is for fiscal third quarter revenue of $11.34 billion, which represents a slight sequential increase but a big decline from the year-ago revenue of $12.2 billion.
Cisco shares, which closed at $24 on November 13 ahead of the company's warning, fell almost 16 percent to $20.24 by mid-December, when Cisco also cut its long-term growth targets.
The stock has gradually improved and closed at $22.71 on Tuesday. But this is likely because of investors' long-term hopes rather than any illusions about a quick turnaround.
"Anybody who's been buying here is certainly going to be patient," Leopold said.
(Reporting by Sinead Carew; Editing by Cynthia Osterman)
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