Cisco Sales Forecast Points to Slower Technology Spending

Cisco Systems, the biggest maker of the equipment that’s the backbone of the internet, projected sales and profit that indicate corporate spending on technology hardware is slowing, according to Bloomberg. Profit before certain costs in the period that ends in January will be 55 cents to 57 cents a share and revenue may decline as much as 4 percent, the company said. Analysts projected profit of 59 cents a share and a 2 percent increase in sales to $12.1 billion, according to data compiled by Bloomberg.

The forecast signals the difficulties facing Chief Executive Officer Chuck Robbins, who is he seeking to recast Cisco as a provider of networking services amid tightening corporate purchasing. With switching and routing still providing the biggest chunk of sales, Robbins is struggling to show growth as customers move away from the mix of fixed hardware and closed software that helped the company become dominant.

Robbins said most of the caution in Cisco’s forecast comes from weak orders from telecommunications service providers for switches, devices that create networks of computers. Orders fell 12 percent in the quarter ended Oct. 29 from a year ago, Cisco said. Some companies are uncertain how political changes will affect their regulatory environment and others are concentrating spending on their mobile networks rather than Cisco gear for their data centers, he said.

Revenue growth has slowed significantly since fiscal 2010, when Cisco reported an 11 percent increase. The company projected sales in the fiscal second quarter ending in January will decline to a range of $11.36 billion to $11.6 billion, based on adjusted revenue of $11.83 billion in the quarter a year earlier. In the fiscal first quarter, Cisco’s net income was $2.3 billion, or 46 cents a share, from $2.4 billion, or 48 cents, a year earlier.

Sales rose 1 percent to $12.4 billion. Excluding some costs, profit was 61 cents a share, compared with analysts’ estimate of profit of 59 cents on revenue of $12.3 billion. Sales in Cisco’s biggest business, switching, declined 7 percent to $3.7 billion from a year earlier. Routing, the second-biggest unit, was a stand out with a revenue increase of 6 percent to $2.09 billion.