Network equipment maker Cisco Systems Inc. warned that its revenue would decline between 8 percent and 10 percent in its second fiscal quarter, sending its shares down 10 percent in late trading Wednesday.
Chief Executive John Chambers blamed weak demand in emerging markets such as China, saying companies there have become more hesitant to buy Cisco products due because of political repercussions from leaks about the United States spying on foreign governments.
Chambers said that in other countries, where the political impact was nominal, Cisco is seeing a slowdown in decision making due to macro-economic issues there.
The executive also cited a big decline in revenue from set-top box sales as the company walked away from less profitable contracts in that market.
He said Cisco's orders fell dramatically toward the end of the first quarter because of big declines in many of its most important emerging market countries.
"The last two weeks of the last quarter was really tough," Chambers told analysts on Cisco's conference call after the results were released.
Cisco also said revenue for the first quarter rose less than expected due to weak demand in emerging markets such as China and the recent U.S. government shutdown's chilling effect on business spending.
Cisco shares were down 10.4 percent at $21.51 at 6 p.m. in New York, after the company released financial targets that analysts said "floored" them. The stock closed at $23.99 on Nasdaq and had already fallen 9 percent since its last quarterly report in August.
Cisco said revenue grew only 2 percent to $12.09 billion in its fiscal first quarter ended Oct. 26, from $11.88 billion in the year-ago quarter, below analysts' average estimate of $12.34 billion according to Thomson Reuters I/B/E/S.
The company itself had forecast growth of 3 percent to 5 percent in the quarter.
Chambers told analysts on the company's conference call that while the partial U.S. federal government shutdown directly cut a smaller than expected $50 million off Cisco's revenue it also dampened demand from nongovernment customers.
Chambers said the shutdown "exasperated the lack of confidence among business leaders we had highlighted over the past few quarters."
Cisco also said its board had authorized up to $15 billion in additional repurchases of its common stock.
Cisco's profit dropped to $2 billion, or 37 cents per share from $2.09 billion, or 39 cents per share.
Excluding unusual items the company earned 53 cents per share compared with Wall Street expectations of 51 cents per share, according to Thomson Reuters I/B/E/S.
Cisco said its latest earnings included pretax charges of $237 million related to a plan it announced in August to cut 4,000 jobs or 5 percent of its workforce.
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