Cisco shares drop following lackluster earnings report
Cisco Systems' share price tumbled on Thursday after the company announced that it had not reached its sales goals in its first quarter and predicted that the next few months would be similarly lackluster.
The San Jose, California, tech company told investors in an earnings call that revenue rose 1.8 percent in its first fiscal quarter, falling well short of its prediction of three to five percent growth. It also said that it expects an 8 to ten percent decline in revenue during this current period.
This grim forecast was a surprise to many traders on Wall Street, who see the tech firm as a bellwether for corporate technology spending. As a result, Cisco shares fell 10 percent during after-hours trading on Wednesday and continued to slide in the morning. As of midday Thursday, the stock price hovered around $21.
In the call, Cisco's CEO John Chambers attributed much of the company's troubles to orders in Brazil, Russia, Mexico, India and China that never materialized. He told investors that he had never encountered this type of situation before, but noted that recent disclosures about the company's relationship with the U.S. National Security Agency (NSA) may have caused foreign entities to become wary of their products.
Rob Lloyd, Cisco's president of development and sales, agreed, as The Wall Street Journal reports that he told investors:
"It's causing people to stop and then rethink decisions."
Chambers and Lloyd also added that the federal government shutdown caused the company to lose almost $50 million in revenue.
Cisco's issues show that even the most reliable stocks are prone to risk. For this reason, portfolio risk management software should be a possession of every investor. Browse the SmartStops website to learn about what we can do for you.