Cisco's gloomy forecast scares Wall Street
07-02-2008
by Charlie Taylor

Cisco has recorded a 7.2 percent rise in net income for its second quarter but predicted a slowdown in sales for the rest of the year due to economic uncertainty.

The world's largest network equipment maker said on Wednesday that its second quarter net income reached USD2.1 billion, or USD0.33 per share, compared to USD1.9 billion, or USD0.31 per share, for the same three-month period a year ago.

Second quarter net sales were USD9.8 billion, a rise of 16.5 percent on the USD8.4 billion recorded for the same quarter last year.

"Cisco delivered another solid quarter with strong revenue and order growth driven by a broad base of geographies, products, services and customer markets," said John Chambers, chairman and CEO, Cisco.

Net sales for the first six months of fiscal 2008 were USD19.4 billion, compared with USD16.6 billion for the first six months of fiscal 2007. Net income totaled USD4.3 billion or USD0.68 per share, versus USD3.5 billion or USD0.56 per share for the first six months of fiscal 2007.

However, while Cisco's latest results surpassed expectations, its shares fell by more than 7 percent on Wall Street after the firm warned that economic uncertainty was beginning to impact on sales. Cisco said that it expected sales would rise by just 10 percent during the third quarter, much lower than previously anticipated. Nonetheless, the firm said it was confident it could weather the storm.

"As we enter the second half of the fiscal year, our innovation pipeline is in excellent shape, our balanced product momentum across core and advanced technologies continues to be solid, and execution against our long-term strategy remains unwavering," said Chambers.

"This constant evolution of moving into new markets and product adjacencies, alongside our core operational and financial strength, is the hallmark of Cisco's ability to act upon key market transitions," he added.