Cisco Shares Fall as Company Reports Dismal Quarterly Guidance

Multinational technology conglomerate Cisco saw its shares dropping on Wednesday after the company reported disappointing quarterly guidance and a revenue drop.

The computer networking equipment maker reported fourth quarter financial results revealing earnings per share of 80 cents adjusted. Analysts according to Refinitiv had been expecting 74 cents. Revenue at $12.15 billion was also ahead of the $12.08 billion that was expected by analysts per Refinitiv, but dropped 9% from a year earlier. This was the third straight drop in revenues for the company.

“While our results reflect the ongoing challenges in the current environment, we executed well,” said CEO Chuck Robbins. “As you would expect, the pandemic has had the most impact on our enterprise and commercial orders, driven by an overall slowdown in spending. We are seeing customers continue to delay their purchasing decisions in certain areas while increasing spend in others until they have greater visibility and clarity on the timing and shape of the global economic recovery.”

The company’s Infrastructure Platforms unit, which includes switches and routers for data centers, delivered $6.63 billion in revenue, down 16% and above the $6.48 billion estimate among analysts surveyed by FactSet. CFO Kelly Kramer said the virus posed a challenge in that business, including for smaller businesses.

Cisco’s Applications revenue, including sales of the Webex video-calling software, totaled $1.36 billion. This was a drop of 9% and below the $1.45 billion consensus estimate.

Robbins said on the earnings call, “Through the hard work of everyone at Cisco, we have undergone a significant transformation in the midst of some of the most complex times in our history. I am so proud of what our teams have accomplished. They have demonstrated resiliency, determination, and compassion as we delivered on our financial commitments, brought market-leading innovation to our customers, transitioned our business model, and driven a culture that has truly shined over the past six months. The Cisco of today is more agile, innovative, and focused.”

The company also provided a disappointing forecast and Robbins told analysts during a conference call that Kramer will be retiring. Kramer will stay on until her replacement has arrived.

Looking ahead Cisco has forecast fiscal first-quarter guidance of 69 cents to 71 cents in adjusted earnings per share and a revenue drop of 7% to 9%. Analysts polled by Refinitiv had expected 76 cents in adjusted earnings per share and $12.25 billion in revenue for the quarter. This means a roughly 7% decline. Cisco will cut $1 billion in costs on an annualized basis, Robbins also said.

Disclaimer: We have no position in Cisco Systems, Inc. (NASDAQ: CSCO) and have not been compensated for this article.