How Emerging Markets Proved Costly For Cisco Systems Inc. (NASDAQ:CSCO)?
Global networking leader Cisco Systems, Inc. (NASDAQ:CSCO) has posted its first quarter results for fiscal 2014. The company posted an increase of 2% in revenues of $12.1 billion, compared to $11.9 billion during the same quarter of 2013. The revenue was below the consensus estimates of $12.4 billion.
The company’s net income GAAP basis for the quarter was $2.0 billion, or $0.37 per share. The figures fell short of consensus estimates of $2.7 billion and $0.41 EPS.
On non-GAAP basis, Cisco’s net income was $2.9 billion, or $0.53 per share, up 11.6 and 10.4% respectively.
Cisco blamed emerging markets as a major contributor to the revenue slowdown. In an earnings call, the company said emerging markets, which makes up more than 20% of Cisco’s product revenue business, fell down to just 12%.
Cisco Systems, Inc. (NASDAQ:CSCO) said one of the reasons for falling demand in emerging markets like China was a backlash against the United States government spying. As the spying agency contractor Edward Snowden revealed the National Security Agency’s nationwide surveillance through internet data, most of which transmitted via Cisco equipment. Cisco’s sales in China were severely hit by this news.
Public sector spending locally increased 13% during the first quarter, despite a 2% decline from the federal government. The government shutdown is estimated to cost Cisco about $50 million.
“While our revenue growth was below our expectation, our financials are strong, our strategy is strong and our innovation engine is executing extremely well. We remain confident in our long-term goal to be the #1 IT company in the world and help our customers solve their biggest business problems,” said Cisco Chairman and CEO John Chambers.
The company expects second quarter earnings per share to be between $0.45 and $0.47 on a non-GAAP basis, and GAAP to be in a range of $0.10-$0.14.
Cisco also announced plans to buy back additional shares of worth $15 billion.