Cisco gives weak outlook; tech shares down

By Sinead Carew and Duncan Martell

"It's the most cautious I've seen CEOs in the U.S. and Europe in many years," Chief Executive John Chambers said on a conference call after reporting quarterly results.

Cisco is the latest of a slew of technology companies that have been raising warning flags about nervous consumers and businesses facing the threat of a recession, though Chambers did say he expected any slump to be fairly short lived.

"People are going to be skittish in coming weeks," said David Garrity, director of research at Dinosaur Research. "This reaction shows people will remain so," he said of the comments on weakening demand from Chambers, who last year had said the global economy was the strongest he had ever seen.

It said it would not provide a fourth-quarter outlook due to uncertainty, but full-year revenue growth would likely be in the lower end of its target range of 13 percent to 16 percent.

Shares of Electronic Data Systems Corp fell 5 percent after the technology outsourcing company posted a lower-than-expected quarterly profit and weak outlook.

Cisco's diversification across corporate, consumer, telecommunications and government markets makes it a proxy for the overall health of global tech spending.

He spooked markets in November by saying he saw dramatic first-quarter decreases in demand from U.S. financial institutions. Cisco's stock has fallen 29 percent since then.

Cisco said it saw a rapid slowdown in orders between December and January. Orders growth in Europe slowed to 8 percent in the second quarter from 20 percent in the first. U.S. orders growth slowed to 12 percent from 13 percent, and emerging markets growth slowed to 20 percent from 35 percent.

Yet Chambers was careful to note that while Cisco missed its European forecast for the first time in many years, he does not expect the slowdown to last more than a matter of months.

For the fiscal second quarter ended January 25, Cisco said net profit rose 7 percent to $2.1 billion, or 33 cents per share, from $1.9 billion, or 31 cents a share, a year ago.

Cisco shares fell to $21.23 in after-hours trade, having earlier closed 0.8 percent lower on Nasdaq at $23.08.