Last time we reported on Cisco it was in terms of ‘record profits and record revenues’ in their Q3 (ending 30h Apr 13). Q4 (quarter ending 31st July 13) was actually pretty much in line with expectations with a 6.2% rise in revenes to $12.4b and profits up 12.7% at $2.8b.
But it was guidance for the next quarter that shocked; sending Cisco’s shares down 10% in after-hours trading – although that still leaves them up 34% YTD. CEO John Chambers warned of a ‘mixed, unstable and inconsistent’ market – particularly in Asia where orders were down 3%. Growth was also slowing in the BRICs. Cisco announced it would cut its workforce by 5% or 4000 jobs.
In an increasingly mobile and Cloud based IT world, Cisco looked well positioned to supply the networking kit required. But it is facing increased competition in its core routing and switching markets. The server market is even more competitive. On top of that, the emerging markets (Cisco makes 42% of its revenues outside the US) are seeing growth rates slow.
Cisco is seen as one of those robust companies where weaknesses in one area or region can be compensated by growth in others. Looks like that won’t apply for the time being.