Feeds

BIG trouble in BIG China: Cisco shares fall off a cliff as CEO warns of slump

Networking giant disappoints Wall St, wobbles at sight of Huawei and pals

Build a business case: developing custom apps

Cisco's shares slumped ten per cent in after-hours trading on Wednesday after the networking kingpin copped to terrible performance in emerging markets.

The hardware giant squeezed $2.9bn in net income (up 11.6 per cent year on year) out of revenues of $12.1bn (up 1.8 per cent) in the third quarter of 2013. The company beat Wall Street's earnings estimates, but missing an expectation of $12.36bn for revenue.

What walloped the stock price, though, was weak guidance from Cisco chief John Chambers – who warned of a 10 per cent drop in sales in the next three months – on the back of a tough sell environment in its emerging markets.

Cisco's sales to emerging markets shrunk 12 percent from the previous quarter, following on from that period's 3 per cent fall in sales to Asia and a 6 percent slump in China.

Cisco chief John Chambers said on a call discussing the earnings that: "China continued to decline as we and our peers worked through the challenging political dynamic in that country."

Translation: China now has enough 'good enough' technology vendors like Huawei and ZTE that they don't need to buy from us any more.

China was the main anchor dragging down Cisco's emerging markets sales last quarter, so we reckon this is a continuation of that decline. Cisco had tried to prepare for this tough environment in the previous three months by canning 4,000 staff – a decision that may help future earnings, but has not done anything to stem the loss in this crucial market.

Wall Street got a further spook later on in the call when the company revealed that revenues could decline a whopping eight to ten percent in the next quarter as it faced an increasingly "challenging" environment.

"While our revenue growth was below our expectation, our financials are strong, our strategy is strong and our innovation engine is executing extremely well," Cisco chief John Chambers said in a canned statement.

Some of that innovation comes in the form of Insieme, which is Cisco's software-defined networking technology. Unlike most other SDN companies, Cisco is developing a product that closely couples its software to its hardware – a design method that runs contrary to the desires of big kit buyers such as Facebook, which have been compelled to build their "own" open gear in response to Cisco's shoring up of its traditional business. ®

The essential guide to IT transformation

More from The Register

next story
True fact: 1 in 4 Brits are now TERRORISTS
YouGov poll reveals terrible truth about the enemy within
Microsoft exits climate denier lobby group
ALEC will have to do without Redmond, it seems
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Barnes & Noble: Swallow a Samsung Nook tablet, please ... pretty please
Novelslab finally on sale with ($199 - $20) price tag
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Primetime precrime? Minority Report TV series 'being developed'
I have to know. I have to find out what happened to my life
Assange™: Hey world, I'M STILL HERE, ignore that Snowden guy
Press conference: ME ME ME ME ME ME ME (cont'd pg 94)
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
7 Elements of Radically Simple OS Migration
Avoid the typical headaches of OS migration during your next project by learning about 7 elements of radically simple OS migration.
BYOD's dark side: Data protection
An endpoint data protection solution that adds value to the user and the organization so it can protect itself from data loss as well as leverage corporate data.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?