Network equipment maker Cisco Systems Inc’s forecast adjusted profit and revenue growth for the second quarter below analysts’ estimates, citing a slowdown in order growth and weakness in its enterprise business outside the United States.
Shares of Cisco, considered a bellwether for the performance of the broader network gear industry, fell 5 percent to $26.41 in extended trading on Thursday.
A strong dollar hurt demand for Cisco’s enterprise products in Asia-Pacific, Canada and Latin America, said Chief Executive Officer Chuck Robbins, who succeeded long-time CEO John Chambers in July.
“Our guidance reflects lower-than-expected order growth in the first quarter, driven largely by the uncertainty of the macro environment and currency impacts,” Robbins added.
Cisco said it expected adjusted profit of 53-55 cents and revenue to be flat to up 2 percent, which translates into $11.94 billion-$12.17 billion.
Analysts were expecting a profit of 56 cents on revenue of $12.55 billion, according to Thomson Reuters I/B/E/S.
Needham & Co analyst Alex Henderson attributed Cisco’s disappointing forecast to its exposure to emerging markets.
“It has a much higher percentage exposure to those emerging markets than most companies,” Henderson said.
Cisco is beefing up its enterprise and wireless security businesses to counter lower spending by telecom carriers, its traditional customers, and nimbler rivals who are quickly grabbing market share through their software-focused networking products.
In August, Cisco teamed up with Apple Inc to improve the performance of iPads and iPhones on its network.
More recently, the company partnered with Ericsson to make next generation networks that should generate additional revenues of $1 billion for each company by 2018.
For the first quarter, the company reported better-than-expected quarterly revenue and profit.
Revenue rose 3.6 percent to $12.68 billion, while analysts were expecting $12.65 billion.
Net income rose 33 percent to $2.43 billion, or 48 cents per share, in the first quarter ended Oct. 24.
On an adjusted basis, the company earned 59 cents per share, above analysts’ average estimate of 56 cents per share.
