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Cisco profit falls, as orders drop off

The networking giant reported falling second quarter figures for its 2009 financial year, just meeting lowered market expectations, but forecast worse to come.

By Miya Knights, 5 Feb 2009 at 10:17

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Cisco late yesterday reported falling profits and revenue for the second quarter of its current financial year.

It also warned there was worse to come as orders for January slid 20 per cent.

Profit fell 27 per cent compared to the second quarter of the firm’s 2007/2008 financial year, while sales made $9.1 billion (£6.3 million) in revenue, dropping 7.5 per cent from the same period last year.

Nevertheless, the company still managed to just beat lowered Wall Street analyst expectations of 30 cents per share on $9 billion in revenue.

After-hours trading following the announcement saw Cisco's share price fall three per cent.

But the fact that the vendor reports its fiscal numbers earlier than the other US tech giants, who reported on their first financial quarters at the end of January, makes it a good indicator of things to come.

It also bases a larger amount of its revenue, some 80 per cent, on sales - as opposed to recurring licensing and maintenance contracts.

John Chambers, Cisco's chief executive, said in a call to discuss the results with analysts that the rate at which it was selling its gear had slowed dramatically.

In January orders dropped 20 per cent year-on-year.

He predicted that revenue would drop a further 15 to 20 per cent in the current quarter, against the last quarter’s net income, which was down nearly 27 per cent on the last quarter to $1.5 billion (£1.04 billion).

But Chambers added that Cisco has achieved “solid financial strength” during the challenging economic times towards the end of last year and into this year.

“We remain comfortable with our long-term vision and strategy as we move into new market adjacencies and prioritise our existing opportunities,” he said.

“We intend to accelerate the alignment of our resources to prioritise future growth opportunities, gradually decrease our operating expenses, while building even stronger customer relationships to position Cisco for ongoing, long-term market leadership.”