Cisco outlook an investor Chambers of horrors

Q2 less of a shocker

Cisco posted a decent 2008 fiscal second quarter, yet remains gloomy about its near-term sales forecast in the US and Europe.

Revenue increased 16.5 per cent to $9.8bn, compared with $8.4bn year-over-year.

Net income climbed 7.2 per cent to $2.1bn, compared with $1.9bn a year ago. Operating income increased to $2.4bn from $2.1bn a year ago.

The earnings matched average analyst estimates, which predicted revenue around $9.79bn. But investors seem more interested in the switching giant's forecast, used as a gauge of upcoming corporate spending.

CEO John Chambers told analysts today that due to "factors out of our control or influence" he expects revenue to grow by about 10 per cent next quarter — below the company's long-term expectations of 12-17 per cent growth.

Customers in US and Europe are currently "cautious," according to Chambers.

"As we enter the second half of the fiscal year, our innovation pipeline is in excellent shape, our balanced product momentum across core and advanced technologies continues to be solid, and execution against our long-term strategy remains unwavering," he said.

Three months ago, Chambers spooked the tech sector with liberal use of the word "lumpy" to forecast US corporate spending. Cisco clearly fears it's not out of the woods yet. But Chambers said he's optimistic about Cisco through a wide-angle lens.

This apparently didn't cheer investors very much. While shares remained flat at closing, Cisco's stock fell 7.5 per cent in after-hours trading. ®