Cisco Systems Inc. triggered a fear of a decline in technical use with its latest forecast. With their latest projections, it may have confirmed them.
CSCO, + 0.19%
estimates that revenue would decline by 5% or more in the current period as it reported quarterly earnings on Wednesday afternoon, news that sent shares down by roughly the same percentage on after-hours trading. In a conference call and interview with MarketWatch, executives described a slowdown that had been limited to smaller parts of the market three months ago, suddenly expanding to almost every corner of the globe.
"It feels like it's a bit of a break," CEO Chuck Robbins said in the conference call. "We saw things like conversion rates on our pipeline were lower than normal, saying things didn't close as we have historically seen the. … It was really just things that slipped. We saw some big deals get done, but were made smaller. "
In an interview with MarketWatch after the interview, CFO Kelly Kramer said that large companies were purchasing through multiple appraisal processes, which means that the orders took longer to get done.
"It wasn't just big deals that were getting smaller, the shopping cycle was being extended," Kramer said.
The insights given Wednesday indicate that concern is justified, far beyond Cisco's near future. Cisco has long been seen as an interference with potential macro problems for the technological ecosystem, as the purchase of large network equipment largely requires the purchase of other equipment and software to be used in new networks. A customer base for large companies and governments spread around the world also makes it a useful proxy for technical use, and top executives have shown a long-standing willingness to provide insight into their dealings with customers.
After saying three months ago that spending was slow from telecommunications clients and emerging markets ̵
Corporate America is heading for a new weakness in a earnings recession that may last the entire calendar year, and Cisco's disclosures on Wednesday suggest that the decline is starting to emerge in their era of illnessness to spend, especially on major technological upgrades. Cisco will survive, and the pressure for more software will soften up, but other tech companies may not be so lucky.