Cisco share declines after revenue includes weak guidance
Shares in Cisco Systems Inc. dipped 7% in afternoon trading Wednesday following a disappointing forecast that may be related to weakness in China and concerns about technology spending that the network giant has so far managed to avoid.
The San Jose, California-based company
CSCO, -4.00%
ranked fourth quarter tax revenue at $ 2.2 billion, or 51 cents per share, at $ 13.43 billion, up 6% the year before. After adjusting for stock-based compensation and other effects, Cisco reported $ 3.6 billion in non-GAAP net income, or 83 cents per share. Analysts surveyed by FactSet had estimated a net income of 81[ads1] cents a share of revenue of $ 13.4 billion. For the year, Cisco made $ 2.61 on revenue of $ 51.7 billion.
Although the report in the fourth quarter confirmed analysts' views that the company has successfully transformed from a hardware device to one focused on hybrid cloud computing and software subscription plans, the guidelines were muted. Cisco forecasts sales with growth of 2% to 2% from the previous year, and an EPS value of non-GAAP from SEK 80 to SEK 82 per share. Analysts polled by FactSet expected growth of around 2.5% and EPS of 0.10 cents.
In response to an analyst's question about soft guidance during a conference call, Cisco CEO Chuck Robbin noted the "challenges" in orders and weaknesses in service providers in China, locked in a toll settlement with the United States
"We saw in July some small indications of some macro offsets that we didn't see in the previous quarter, "Robbins said in the call after the results were announced.
"We did not close (quarter) as strongly as we would like," continued Robbins. "The macro problems manifested … I do not judge where we are based on (Q1) guidance."
Read more : How Cisco Works Around China Tariffs
Cisco has largely avoided entanglement in the US-China trade conflict by adjusting prices and moving the contract industry from China, which accounts for less than 3% of sales. boxed out "of the Chinese market by some nationalist sentiment, affecting sales," Cisco CFO Kelly Kramer told MarketWatch in a telephone interview.
Cisco shares are up 17% this year, while the S&P 500 index
SPX, -2.93%
got 13% at that time. One day when the stock market fell during the recession, shares in Cisco had already been penalized, falling by 4% in the regular session.
Robbins previously characterized Q4 as "a strong ending to a great year." Infrastructure platforms led revenue for the quarter, up 6% to $ 7.9 billion, aided by stable demand for network switches, including the popular Catalyst 9000. Application division revenue improved 11% to $ 1.5 billion, and the security segment climbed 14% to $ 714 million .
