IT spending projections have been revised lower in recent months, according to CEO Chambers. Cisco Systems Inc.’s fiscal third-quarter earnings jumped 20% on higher revenue and margins, though the network-equipment maker struck a cautious tone about the information-technology spending environment.
Worries about Europe and the strength of the global economy, public-sector spending pressures, longer sales cycles, and some smaller deal sizes from enterprise customers led Cisco to offer a downbeat outlook for the current quarter.
Shares were off 8.4% to $17.20 in after-hours trading, pushing Cisco into the red for 2012. As the world’s dominant maker of networking devices that support Internet traffic, Cisco is often seen as a bellwether of companies’ technology spending plans.
Chief Executive John Chambers said IT spending projections have been revised lower in recent months as worries in Europe and customer conservatism has gotten worse, though he said networking should do better than the industry as a whole.
Chambers said many of Cisco’s customers say their plans are to spend more in the back half of the year, though in the very next breath they say they intend to wait for more clarity in Europe and want to see what government policies will be enacted.
Even in that difficult operating environment, Chambers said he believed data would show Cisco is gaining market share.
For the fiscal fourth quarter, Cisco projected adjusted earnings to range between 44 cents to 46 cents a share on revenue growth of 2% to 5% from prior-year levels, below the 49-cent profit and 7% top-line growth projected by analysts surveyed by Thomson Reuters.
Chief Financial Officer Frank Calderoni told Dow Jones Newswires the current-quarter outlook was based on what Cisco was hearing from customers, IT industry trends and an overall conservative spending outlook.
Cisco is “only reacting right now with the information we have in front of us,” he said, adding it is hard to ascertain the long-term climate. Cisco is mainly focused on areas in which it can execute in a tight spending environment, he said.