Cisco Expects a Decline in Revenue of Up to 10%

The network equipment maker’s chief executive, John T. Chambers, issued the warning as the company reported lower-than-expected revenue for its first fiscal quarter. Mr. Chambers attributed the warning to sluggish demand in emerging markets, as well as the chilling effect of the recent government shutdown on business confidence.

Mr. Chambers said companies in emerging markets like China had become hesitant to buy Cisco products because of political repercussions from reports about the United States spying on foreign governments.

He said Cisco was also seeing a slowdown in decision-making by companies because of economic uncertainty. Mr. Chambers additionally cited a big decline in revenue from television set-top box sales as the company pulled away from less-profitable contracts in that market.

He said Cisco’s orders fell sharply toward the end of the company’s 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,” Mr. Chambers told analysts on a conference call.

Shares of Cisco fell 10.3 percent, to $21.52, in after-hours trading after the company released its disappointing financial results targets.

Cisco said revenue grew only 2 percent, to $12.09 billion, in its fiscal first quarter, which ended Oct. 26, from $11.88 billion in the period a year earlier, below analysts’ average estimate of $12.34 billion, according to Thomson Reuters.

The company had forecast growth of 3 percent to 5 percent in the quarter.

Mr. Chambers told analysts that while the partial federal government shutdown directly cut a smaller-than-expected $50 million off Cisco’s revenue, it also reduced demand from nongovernment customers.

He said the shutdown “exasperated the lack of confidence among business leaders we had highlighted over the past few quarters.”

Cisco said its net income dropped to $2 billion, or 37 cents a share, from $2.09 billion, or 39 cents a share. Excluding one-time items, the company earned 53 cents a share, compared with Wall Street expectations of 51 cents a share.

Cisco also said its board had authorized up to $15 billion in additional repurchases of its common stock.

Cisco to Cut 4,000 Jobs Despite Growth in Revenue

Cisco's revenue guidance for the current quarter was weaker than Wall Street expected, and shares fell sharply in extended trading.

The company's stock fell $2.51, or 9.5 percent, to $23.87 in extended trading after the results were released. The stock closed up 6 cents at $26.38 in the day's regular trading session.

Cisco Systems Inc. earned $2.27 billion, or 42 cents per share, in the three months that ended on July 27. That's up from $1.92 billion, or 36 cents per share, a year earlier.

Adjusted earnings were 52 cents per share in the latest quarter, squeaking past Wall Street's expectations by a penny. This figure excludes charges stemming from a patent settlement with TiVo and other one-time items.

Revenue rose 6 percent to $12.42 billion from $11.69 billion.

Analysts, on average, had expected revenue of $12.41 billion, according to a poll by FactSet.

Cisco's performance is widely regarded as a bellwether for the technology industry. That's because the San Jose, California, company cuts a broad swath, selling routers, switches, software and services to corporate customers and government agencies. Cisco's fiscal quarters end a month later than most other major technology companies, giving it additional time to assess economic conditions.

Cisco's product orders grew 4 percent year-over-year, the same as in the third quarter of this year. Orders in the Americas region grew 5 percent, while Asia declined 3 percent due to economic challenges in the region, Chambers said. Europe, the Middle East, Africa and Russia increased 6 percent. On its own, Europe was up 9 percent.

Chambers said that economic conditions in Europe still "vary significantly" by region, with the north and the U.K. showing "very positive progress."

"We remain cautious, however, given the instability of the southern region," he added.

The caution is evident in Cisco's guidance. For the current quarter, the company said that said it expects revenue to grow 3 percent to 5 percent year-over-year. Analysts are expecting $12.72 billion, a 7 percent increase from last year's $11.9 billion.

Over the long term, Chambers said that the company still expects revenue to grow 5 percent to 7 percent, and added that Cisco is in a "better position in the market today than ever before."

Cisco Plans to Cut 4,000 Jobs, as It Posts Profit Gain

Cisco’s Warning: On “Nightly Business Report,” Jon Fortt of CNBC weighed in on Cisco Systems, whose chief executive on an earnings call announced a reduction of about 5 percent of its staff, despite strong revenue.

Cisco Rides Technology Trends to 14.5% Increase in Profit

The world’s largest maker of networking gear has stumbled in recent years as companies bought less and new competitors arose. In response, Cisco moved into technologies like online video, cloud computing and delivery of high-speed Internet over wireless networks.

Those investments appear to be paying off. On Wednesday, Cisco said its sales of switches and routers were basically flat in its third fiscal quarter, which ended April 27. Sales of equipment for big cloud-computing data centers, video and wireless systems, however, were substantially higher.

“This is where the action is,” said John Chambers, Cisco’s chief executive, in an interview after the earnings announcement. “We bet on some of these seven years ago, now they’re paying off.”

Mr. Chambers wants Cisco to diversify into building sophisticated networked systems with many parts. That could prompt growth of its main switching and routing businesses, because it would mean even more Internet traffic from sensors, consumer devices, and industrial products to and from the Internet.

Cisco needs something to revive those businesses, which still make up nearly half of its revenue. Sales of switching gear, Cisco’s biggest sector, fell 2 percent compared with a year ago, while router sales were flat. Video equipment sales grew 30 percent, wireless equipment rose 27 percent and data center gear was up 77 percent, but their total revenue was about half that of switches and routers.

Over all, Cisco’s net income rose 14.5 percent compared with a year earlier, to $2.5 billion, or 46 cents a share. Revenue was up 5.4 percent, to $12.2 billion. By the nonstandard accounting measures popular with many tech companies, Cisco had net income of 51 cents a share, up 6.3 percent from a year earlier. Wall Street analysts, based on a survey by Thomson Reuters, had projected net income of 49 cents a share and revenue of $12.18 billion.

“The new products got them out of what looked like a tough quarter,” said Eric Suppinger, an analyst with JMP Securities in San Francisco.

Results for Cisco, which is based in San Jose, Calif., are often taken as a barometer of overall business spending. Sales in North America rose 10.4 percent, to $7.1 billion, and Mr. Chambers described the business environment as “slow but steady.” Sales in Europe were lower, he said, primarily because of weakness in countries like Spain. “You’re beginning to see Europe bottom out, with the exception of the south,” he said.

Cisco shares were up more than 8 percent in after-hours trading, after closing down 0.28 percent at $21.21.

Bits Blog: C.E.S 2013: Cisco Wants Your Video to Find You

Michael Nelson/European Pressphoto Agency Marthin De Beer, a senior vice president at Cisco, in Las Vegas on Monday.

In the future, the TV shows and movies you want to watch should find you — you shouldn’t have to find them. And you should be able to watch them on any device.

That’s the video service Cisco Systems wants to put in your living room. On Monday, the company introduced Videoscape Unity, a cloud-based video platform that it hopes service providers, like cable TV companies, will embed in their set-top boxes.

Dispatches from the Consumer Electronics Show in Las Vegas.

The software package includes a tool to recommend shows to a person based on past viewing patterns. It creates a profile for each user — if Mom likes watching musicals, for example, her profiles will show a list of music-related channels; if Dad likes sports, his profile would show ESPN and Fox Sports.

The other major part of Cisco’s package is a cloud-based DVR. If you want to record an episode of “Mad Men,” it can potentially be stored in the provider’s cloud for as long as you like, as opposed to your local hard drive. As a result, you should be able to watch that episode on any device, like an iPad or Android phone.

Cox Communications is Cisco’s first United States customer to commit to offering Videoscape Unity.

Cisco is not the only company thinking about making content easier to find on the television. Panasonic and Samsung demonstrated a similar feature in their TV sets that makes recommendations based on a person’s TV habits. Some of Panasonic’s televisions even use a built-in camera to detect a person’s face and switch to his or her profile.

This post has been revised to reflect the following correction:

Correction: January 8, 2013

This post has been corrected to note that Cisco did announce a customer for its new product, Cox Communications.

Cisco Revenue and Profit Exceed Forecasts

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