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Cisco forecasts lower than estimated sales for fiscal 3Q

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13 February 2014

Cisco forecast sales for the fiscal third quarter that might fall short of estimates amid weakness in emerging markets and a slump in demand from telecommunications-service providers.

Revenue would decline 6 per cent to 8 per cent in the current period ending in April, according to the San Jose, California-based company, in a conference call yesterday.

That indicated sales at $11.2 billion to $11.5 billion, with analysts projecting $11.3 billion on average, data compiled by Bloomberg revealed.

The company's shares were down in extended trading.

The biggest maker of network routers and switches was getting hurt by slowing down of sales outside the US and competition from Huawei Technologies Co, Juniper Networks Inc and Hewlett-Packard.

Investors remain concerned that the company's forecast indicated it would continue to face difficulties in selling products in emerging markets, according to Bill Kreher, an analyst at Edward Jones & Co. in St. Louis, Missouri, Bloomberg reported.

Kreher who had a hold rating on the stock said, there was some hope that the inflection point in the company's business would happen earlier as opposed to later.

He added, however, a return to growth in fiscal '14 seemed unlikely.

Cisco Q2 sales were down 8 per cent as against the same period a year earlier, while net income fell 54.5 per cent, partly due to a pre-tax charge of $655 million related to the expected cost of remediation of issues with memory components in certain products sold in prior fiscal years.

"We delivered the results we expected this quarter. I'm pleased with the progress we've made managing through the technology transitions of cloud, mobile, security and video," stated chairman and CEO John Chambers in a statement.

Chambers added, "Our financials are strong and our strategy is solid. The major market transitions are networking centric and as the Internet of Everything becomes more important to business, cities and countries, Cisco is uniquely positioned to help our customers solve their biggest business problems."

The company had warned in its last quarterly conference call on 13-Nov-2013, that revenue would decline 8-10 per cent this quarter (Q2) due to lower demand in certain countries, such as China, due to fallout from the NSA scandal. 

In January, during International CES 2014, Chambers predicted the Internet of Things, over the next several years would be a $19 trillion market, including $4.6 trillion in the global public sector.





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