SAN JOSE -- Cisco Systems (CSCO)' shares took a nose dive after its earnings report missed Wall Street's projections -- which the computer networking giant partly attributed to the government shutdown and fallout over the NSA's spying revelations -- and it warned of a big slump in its sales next quarter.
The San Jose company said it earned 37 cents a share on sales of $12.1 billion for its first fiscal quarter, which covered the three-month period that ended Oct. 26. Analysts surveyed by Thomson-Reuters generally had expected earnings of 41 cents a share on sales of $12.36 billion.
Company officials blamed a variety of factors, including the government shutdown, expenses associated with its recent layoffs and an unexpected drop in product orders, especially from emerging-market countries.
"The last two weeks of last quarter were very tough," said CEO John Chambers, noting during a conference call with analysts that the company received $600 million to $700 million fewer orders for its products than it had anticipated.
Asked if disclosures about the NSA snooping on Internet companies' data might have impacted sales at Cisco, whose equipment routs much of that information across the Web, Chambers answered that "it is an impact in China." But he said he didn't think that had greatly affected Cisco's business.
A number of analysts expressed surprise during the call at Cisco's projection that its sales next quarter would be 8 percent to 10 percent lower than they had been for the same quarter last year. Asked repeatedly about that tepid forecast, Chambers mostly attributed it to weak demand in emerging markets.
The company reported its earnings after the market closed, when its stock price rose 27 cents -- or about 1 percent -- to $24. However, in after-hours trading, its shares fell 10 percent to $21.59.
Cisco -- which sells switches, routers, servers, security devices, videoconference gear and other networking equipment to businesses and government agencies -- is Silicon Valley's fourth-biggest corporation in revenue. But it faces heavy competition in some of its markets and some of its customers have reduced their purchases because of the sluggish global economy. In addition, during its last quarterly financial report, Chambers announced he was cutting 4,000 jobs -- about 5 percent of his global workforce -- to reshape its operations.
"We just have too much in the middle of the organization, " he declared at the time. "We've got to speed time to market. Small teams move much faster."
Chambers hopes to generate more sales by providing consulting services and by offering products for the growing array of household, industrial, medical and other gadgets that are being connected to the Internet. He also has identified cybersecurity, data centers and video as promising business opportunities for the company.
Cisco's stock took a hit after the previous earnings report, when Chambers revealed that its business has been slowed by a "challenging and inconsistent" global economy. But the stock generally has risen over the last month and some Wall Street experts generally have good things to say about the company.
"We remain positive on Cisco's growth potential," S&P Capital IQ analyst James Moorman said Wednesday.
In a recent note, analysts at Baird Equity Research also sounded generally upbeat, concluding "the company is executing better than ever."
But a mixed assessment was offered by Raymond James analysts.
While noting some positive signs for Cisco's business, they added, "the slow pace of an economic recovery and poor employment remain headwinds, as do concerns about government debt both here and abroad."
Contact Steve Johnson at 408-930-5043. Follow him at Twitter.com/steveatmercnews.