Cisco gives a tepid current-quarter forecast; sees weak client spending

(Reuters) – Cisco Systems Inc gave a weak outlook for the third quarter, with revenue and profit on Wednesday and said it continued to expect that there will be a break down in customer spending due to the current macro-economic environment, sending its shares down 4%.

A FILE PHOTO of A visitor is using a mobile phone on the front panel of the Cisco booth at the Mobile World Congress in Barcelona, Spain, February 26, 2019. REUTERS/Rafael Marchante

The company forecast adjusted earnings of 79 cents to 81 cents per share, the midpoint of which was in-line with the analysts estimate.

The revenue for the current quarter is expected to fall from 1.5% to 3.5%, which translates to a total of $12.51 billion to $12.77 billion, according to Reuters’ calculations. Analysts are expecting revenue of $12.62 billion.

“We are seeing more decision cycles for our customer segments, for a variety of reasons including but not limited to macro uncertainty, as well as its unique geographic issues, the” Chief Executive Officer Chuck Anderson said at the post-transcription.

“(The customers) are just a little bit of caution, and try to see what’s going on.”

The Cisco unified communications infrastructure unit, which is composed of the traditional business of supplying switches, and routers on an 8% decline in revenue, to $6.53 billion.

The company has struggled as customers increasingly prefer the use of cloud-based services, which are provided by companies such as Inc., Microsoft Corp. and instead of upgrading their networks and servers.

Cisco reported revenue declines in all regions, including a 5% decline in south America’s largest market, accounting for about 58% of total revenue.

The broad weakness in orders is likely to be a multi-quarter problem, a Needham analyst Alex Henderson said.

The sales of the application-software unit sales decreased 8% to $1.35 billion, while the fast-growing security business firewall to provide protection, and a breach-detection systems has increased by 9% to $748 million.

Sales were down 3.5% to $12 billion in the second quarter, which ended Jan. 25, but still the analysts ‘ estimate of $11.98 billion.

Excluding items, Cisco earned 77 cents a share, edging past estimates by 1 cent.

Report by Ayanti Berra in Bengaluru; Editing by Anil D’silva

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