Cisco cuts long-term revenue, earnings targets

Thu Dec 12, 2013 6:37pm EST
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By Sinead Carew and Nicola Leske

NEW YORK (Reuters) - Cisco Systems Inc on Thursday cut its longer-term earnings and revenue growth targets due to problems in emerging markets, conservative customer spending and stalling growth in its core business of network equipment, the latest in a drumbeat of bleak developments at the Silicon Valley company.

The company's shares fell as much as 3 percent to a seven-month low after it cut its three- to five-year revenue growth target to a range of 3 percent to 6 percent at its analysts' meeting. Its previous range was 5 percent to 7 percent.

Cisco, which issued a warning on November 13 that revenue would decline in the current and coming quarters, also reduced its target for earnings-per-share growth to a range of 5 percent to 7 percent for the same period from its previous target of 7 percent to 9 percent.

Chief Financial Officer Frank Calderoni said revenue in Cisco's core network equipment business would be flat to up 1 percent in the same time frame. He promised higher growth in areas such as software, services and security products.

BMO Capital Markets analyst Tim long said that while Cisco was seeing exciting growth in some areas, he saw the slump in growth in its core router and switch market as a "big disappointment."

ISI Group analyst Brian Marshall said Cisco's new targets were more realistic given the challenges it is facing.

In response to analyst worries about how much of Cisco's troubles were specific to the company as opposed to industry-wide, Chief Executive John Chambers said Cisco tends to suffer from macro issues ahead of rivals.

"We are the canary in the coal mine," Chambers said, noting that the company often sees problems two to three quarters ahead of peers. But Chambers told reporters that it also means Cisco benefits from improving economies more quickly than other companies.   Continued...

A Cisco office is pictured in San Diego, California November 12, 2012. REUTERS/Mike Blake