Extended trading didn't go well for Cisco Systems Inc. on Wednesday as stocks crumbled 8 percent on the heels of a dismal forecast linked to weakness in tech-spending that weighed heavily on the company.
Cisco Systems (CSCO) posted weaker-than-predicted guidance and had already retreated 5 percent on a stagnant day at Wall Street. The company had rung up fiscal earnings of $2.1 billion, or 50 cents per share for the fourth quarter, on revenue of $13.44 billion.
After adjusting for share-based payments and other compensations, Cisco posted $3.5 billion in non-generally accepted accounting principles (GAAP) net income or 83 cents per share. Market observers polled by FactSet had projected a net income of 81 cents per share on $13.4 billion total sales. CSCO gained $2.60 per share on $51.7 billion in revenue for the year.
Although the company's posting for Q1 supported investors' sentiments that CSCO has successfully risen from a hardware brand to a company focused on Cloud Computing and operating system subscription service, its guidance was rather faint.
During late Wednesday's media briefing, Cisco Systems chief executive officer Chuck Robbins said the company actually saw some moderate indications of macro movements that they didn't observe in the previous quarter. "We saw a 'significant impact' on business operations in China as a result of its trade issues with the US.
As a reaction to a Wall Street trader's query regarding Cisco's weak guidance, Robbins pointed out that the company could not wrap up the quarter "as strong as we would have liked," stressing that macro issues "manifested themselves... I don't judge where we are based on first-quarter guidance."
The company's expected revenue came up short in China with a 25% drop on a yearly basis for the current quarter, Kelly Kramer, Cisco's chief financial officer, said.
A huge chunk of Cisco's profits comes from distribution and sales of its networking services, including data center routers and switches. These products comprise Cisco's Infrastructure Platforms business, which gave the company around $7.79 billion in sales this year.
Cisco's stocks grew decently at 18 percent this year, while the S&P 500 index rallied 14% in the same period. However, at one time, CSCO has crashed due to the fears of a global economic turmoil, dropping 5% in one single session.
Meanwhile, Cisco's large fanbase could help the company sustain its muted macroeconomic outlook, noted JP Morgan analysts, who gave CSCO an "Overweight Rating" on Wednesday.
