Networking market leader Cisco Systems posted third-quarter profits that beat Wall Street's lowered estimates by a penny per share, but industry watchers were more interested in president and chief executive John Chambers's outlook for the future than the actual amount of profit.
As expected, profit was far below the figure for the same period last year. The world's top supplier of network equipment reported net earnings for the period of $230m, or three cents per share, on revenue of $4.73bn.
This compares with earnings of $1bn, or 13 cents per share, on revenue of $4.93bn in the same period last year. Analysts surveyed by Thomson Financial/First Call were expecting two cents per share.
"The first four months of 2001 were extremely challenging as we went from year-over-year bookings in excess of 70 per cent in November, to 30 per cent negative growth within a span of several months," said Chambers.
He added that the company has seen changes that used to take place over multiple quarters, or even over years, now taking place within months.
"It is also now clear to us that the peaks in this new economy will be much higher, the valleys will be much lower and the movement between these peaks and valleys will be much faster," said Chambers. "We are now in a valley much deeper than any of us anticipated."
Quarter-to-quarter sales also dropped for the first time in Cisco's 11-year history. Sales of the company's routers, switches and network access products declined 29 per cent to $4.73bn from $6.7bn in its fiscal second quarter.
During a conference call, Chambers repeated earlier predictions that fourth-quarter revenue is likely to be flat with the third-quarter level at best and could be down as much as 10 per cent sequentially.
Although Chambers felt confident for the long-term outlook for the company, he said: "This may be the fastest deceleration any company of our size has ever experienced."
This is only the second time the networking giant has missed earnings forecasts. The first time was in the second quarter. At the close of trading, Cisco shares were up $1.11 to $20.36.
Cisco recently said it plans to cut 8500 jobs, or 17 per cent of its workforce.
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