Cisco casts gloom on markets - again
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Cautious outlook from network equipment maker fuels recession woes
A disappointing earnings forecast from network equipment maker Cisco has once again triggered pessimism in the stock markets.
John Chambers, Cisco’s CEO, last night announced that the company would fail to meet analysts’ expectations for revenue growth in its third quarter. Customers in the US and Europe are spending cautiously, he said, and sales growth in January has been disappointing.
Shares in technology companies have dropped significantly as a result, with Cisco’s own share value falling by 8.6% following the announcement.
The pessimism comes at a time when technology industry revenue growth is at a seven year high. The Information Age Index, which collates revenue growth at the world’s top IT companies, currently sits at 13.5% – its highest figure since January 2001.
However, Cisco is seen as a bellwether for the IT industry, as its networking equipment contributes to all manner of computing projects. A similar fall in technology shares was seen when Chambers described the enterprise IT outlook as ‘lumpy’ in November 2007, although some optimism was restored in the interim thanks to more positive results from IBM, Microsoft and SAP.
And, of course, past success is no guarantee of future performance. When the Information Age Index reached 14.1% in January 2001, it was followed by 12 months of catastrophic revenue decline otherwise known as the dot-com crash.
Further reading
Cisco spooks Wall Street with credit crunch caution
IBM issues good news early to ease investor anxiety
Financial services sector looks to IT to relieve credit woes
