Cisco forecasts revenue declines

Networking giant Cisco expects revenues to fall by up to 10% this quarter as it fails to build momentum in emerging markets

Cisco today (14 November 2013) reported disappointing first quarter results and warned investors of rockier roads ahead because of failures in the emerging markets.

Cisco’s revenues for the quarter rose to $12.1bn, but this only translated to a 1.8% growth year-on-year, compared to the 3-5% it had expected. Profit declined by 4.6% to $2bn.

The main issue was in new-growth countries where it had expected to win deals that never came. Sales dropped in Russia by a significant 30%, alongside a 25% fall in Brazil and 18% declines in China, Mexico and India.

Cisco’s CEO, John Chambers, admitted the NSA scandal in the US could have affected its business in these countries, as well as facing stiff competition from established Chinese players such as Huawei. However, Chambers also blamed the US government shutdown in Cisco's home market for a loss of $50m.

There were some positive numbers, with a 3% rise in revenues for Cisco’s switching business and an 8% growth for its wireless division. But, Chambers could not escape figures such as the 14% fall in revenue for service provider video products and predicted revenue losses of up to 10% for the current quarter.

“We did see the weakness, increased conservatism and slower decision making on a global basis accelerate beyond our expectations at the back end of this quarter,” Chambers said, during Cisco’s earnings call. 

“In our leadership reviews in mid-September we believed our orders in the quarter would translate to revenue in our guidance range.

“We will continue to focus on emerging markets, investing through the challenges and expect to see return to growth in a few quarters, with all the appropriate caveats.”

Chambers concluded: “We will continue to focus on the innovation and execution to drive the acceleration of the business. Managing through product and market cycles is part of being a leader in the technology industry. We feel very confident in our ability to work through these cycles over the coming quarters.”

Cisco announced in August it would be making 4,000 staff redundant – equivalent to 5% of its workforce.

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