Cisco shares hit by outlook fears
By Khaama Press - Fri Nov 12 2010, 1:32 pm
(BBC) – Shares in IT networking giant Cisco Systems have fallen sharply following disappointing first quarter results announced late on Wednesday.
Net income rose, by 8% to $1.8bn (£1.1bn; 730m euros), but investors were expecting more.
They were also rattled by comments about the outlook for the firm, which its chief executive said faced “unusual uncertainty”.
As a result, Cisco fell by 15.8% in a day of heavy trading for its shares.
An estimated 300 million Cisco shares changed hands – making it the third busiest day for the technology firm’s shares since it floated in 1990.
It also had a negative impact on the technology-heavy Nasdaq index, which was down 0.9%.
However, Cisco’s chief executive John Chambers described the results as “solid”, despite the “challenging economic environment”.
Investors consider Cisco as a bellwether, reflecting the health of companies as it dominates the market for the technology behind corporate IT networks.
Some analysts fear that it is lagging behind faster-growing rivals.
“If you look at what Cisco’s peers have said, as well as other data points in the supply chain, they’ve been arguably more upbeat,” said Kaufman Bros analyst Shaw Wu.
However, Mr Chambers said weak economic conditions were to blame, the not more intense competition.
Cisco pointed to a drop in spending by cable companies, European governments and US states.
“Our execution in areas we can control and influence speak to the success and relevance of the company’s strategy.”