Cisco stock falls after warning from Chambers

John Chambers noted 'unusual uncertainty' in the IT sector

Cisco chief executive John Chambers has warned investors of possible trouble ahead after the company posted quarterly results that failed to meet analyst expectations.

Chambers classified the current economy as one of "uncommon uncertainty" and warned of difficulties down the road for the IT industry. Cisco stock fell heavily on the news.

The company posted sales of $10.8bn (£6.9bn) over the quarter, up 27 per cent from last year. Profits were listed at $1.9bn (£1.21bn), leading to a 74 per cent increase in earnings per share.

"Whether the global economy continues to show mixed signals or not, the strength of our financial model and profit generation serves us well," Chambers said.

"We are very confident in our strategy, and will continue to aggressively move into new areas where the network is becoming the platform, and where our customers want us to invest and innovate."

Charles King, principal analyst at Pund-IT, agreed with Chambers's assessment of the economic climate and its uncertainty, telling V3.co.uk that worries about the pace of recovery are causing some firms to hold back on IT purchases and retain older systems.

"Over the past few weeks we have seen signs that the economic recovery has hit a speed bump, or a brick wall, depending on who you ask," he said.

"Everyone entered 2010 with a significant degree of optimism and, as the months have gone on, unemployment continues to be brutal."

However, King suggested that the 10 per cent drop in Cisco's stock after the financial report was an overreaction on the part of the market.

"If you take a look at the hit that HP has taken after losing a very charismatic chief executive, Cisco announcing an off quarter and receiving a similar sort of paddling doesn't seem fair at all to me," he said.

"Cisco has been a very profitable performer in the IT business, and I think the investor reaction is reflective of the broader doom and gloom than any significant problem the company has."