Cisco shortfall jolts Wall Street, sending shares tumbling further

SAN FRANCISCO: Cisco Systems Inc spooked investors with a warning that Chinese lockdowns and other supply disruptions would wipe out sales growth in the current quarter, renewing broader concerns about tech spending in a shaky economy.

The outlook sent Cisco shares down as much as 19% in late trading and weighed on stocks of other networking companies, dealing a fresh blow to an already-battered sector.

Even before Cisco’s latest plunge, its stock was down 24% this year.

The question for much of Wall Street was whether Cisco’s forecast meant that customers were cutting spending, but the networking-equipment giant said supply woes – and not a pullback in expenditures – was the main problem.

“Even though these top-line numbers don’t look good, there’s a very simple explanation,” chief executive officer Chuck Robbins said on a conference call with analysts. “Customers are not signalling any real shift at this point. There’s no reflection of demand issues in our guidance.”

Cisco is the biggest maker of machines that power corporate networks and form the backbone of the Internet. Investors look at its outlook as a proxy for corporate spending on infrastructure, which is why the sudden shift was especially jarring.

The company had predicted growth in the current quarter of about 6%. It said Wednesday that sales would actually decline by 1% to 5.5% in the period, which ends in July. Cisco’s earnings forecast also was short of Wall Street predictions.

Cisco shares tumbled as low as US$39 (RM172) in late trading. That followed a 4.4% decline in trading Wednesday,