Cisco Shares Tumble on Disappointing Revenue Forecast

SAN JOSE, Calif. – Shares of technology bellwether Cisco Systems Inc. (CSCO) fell more than 6 percent Wednesday, a day after the company's revenue outlook raised concern about the pace of technology spending.

Cisco said revenue would grow 1 to 3 percent in the current fiscal second quarter from the first quarter. That led some on Wall Street to question whether Internet technology spending by large corporations accounting for the bulk of its revenue may be accelerating at a slower-than-expected pace.

Just 15 months ago, Cisco had predicted that a recovery was in place. At least one analyst attributed the company's lackluster outlook to an uncertain economy.

"I don't necessarily think it's company-specific," said A.G. Edwards analyst Greg Teets, noting he had expected a more modest decline in Cisco's stock. "We've all seen the same signals that suggested that things weren't great in the third quarter."

Cisco's stock fall pulled networking stocks much lower and also contributed to broader weakness in the Nasdaq Composite Index, which was also weighed down by softness in semiconductor shares.

Cisco Chief Executive John Chambers (search) told Reuters late Tuesday that the company had adopted a "middle of the fairway" view of the economy.

The company's forecast implies revenue of $6.03 billion to $6.15 billion in its current quarter. Analysts were expecting $6.21 billion, on average, within a range of $6.08 billion to $6.38 billion.

"You have to ask yourself, why did they give such cautious guidance?" said CIBC World Markets analyst Steve Kamman. Kamman is retaining his "sector outperformer" rating on Cisco shares; he rates the technology sector "underweight." He said he is confident that even if the economy sputters, Cisco will be able to take a significant piece of IT spending.

Bear Stearns analyst Wojtek Uzdelewicz listed "weak guidance for a seasonally strong" second quarter, increasing competition globally from Chinese companies," and "limited gross margin leverage" as his concerns about the stock in a research note Wednesday morning.

Shares of San Jose, Calif.-based Cisco fell $1.25, or 6.3 percent, to $18.50 on the Nasdaq Wednesday afternoon. The stock began to fall in after-hours trading Tuesday night.