Cisco results to reflect sales slump; investors brace for more bad news

NEW YORK Wed Feb 12, 2014 7:36am IST

A Cisco logo is seen at its customer briefing centre in Beijing, November 14, 2013. REUTERS/Kim Kyung-Hoon/Files

A Cisco logo is seen at its customer briefing centre in Beijing, November 14, 2013.

Credit: Reuters/Kim Kyung-Hoon/Files

Related Topics

Stocks

   

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)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Wipro Results

People walk in the Wipro campus in Bangalore June 23, 2009. REUTERS/Punit Paranjpe/Files

Wipro sees rosier end to year as U.S. clients spend

India's third-biggest software services firm Wipro Ltd , under pressure to improve lacklustre sales growth, said it saw a rosier end to the year as more confident U.S. clients increase spending.  Full Article 

Reuters Showcase

New Email Service

New Email Service

Google launches new email service dubbed "Inbox".  Full Article 

Apple-1 Auction

Apple-1 Auction

Early Apple computer sells for $905,000 at auction.  Full Article 

No More Nokia

No More Nokia

Microsoft looks set to drop Nokia name from smartphones.  Full Article 

User Data Security

User Data Security

Apple CEO discusses security with top Chinese official amid hacking claims - Xinhua.  Full Article 

Patent Wars

Patent Wars

Big Tech winning battle with 'patent trolls'.  Full Article 

Record Season

Record Season

FedEx expects record peak volume of 22.6 million packages on Dec. 15.  Full Article 

Yahoo Earnings

Yahoo Earnings

Yahoo ekes out Q3 revenue gain despite display ad weakness.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage