Less computer networks being upgraded is a possible cause for Cisco’s recent reduction in business. Cisco shares fell 94 cents, or 5.1 percent, to $17.39 in regular trading Wednesday. In extended trading, after the release of the results, the stock was down another 92 cents. On Oct. 24, the shares hit $15.90, the lowest level since 2003, after the Internet bubble burst.

Because Ciscos previous fiscal quarter ended Oct. 25 rather than Sept. 30, it was the first major technology company to include results for October. The global credit crisis worsened dramatically during the month, and the severity of the order downturn Cisco reported is sure to be felt at other companies.

Chambers said that as late as August, orders were up 7 percent from last year. By October, there was a 9 percent decline instead, as the business slowdown in the U.S. spread to Europe, emerging markets and Asia. Chambers revenue projection assumes that Octobers order level holds through into January, be he cautioned that results could swing outside the range to either way.

The downturn also affected all of Ciscos product categories, which stretch from cable set-top boxes to giant routers directing traffic on the main highways of the Internet and in corporate networks.

Chief financial officer Frank Calderoni said the company was particularly sensitive to swings in customer demand because 84 percent of its revenue is nonrecurring. Many other technology companies derive more of their revenue under long-running service contracts.

Chambers said the company plans to cut $1 billion from its annual costs by the end of its fiscal year, by pausing hiring, cutting marketing and travel and delaying some capital projects.

Thats a contrast to Ciscos optimistic stance earlier this year, when then were no talk of cutbacks and the company said it would use its cash pile, now at $27 billion, to invest through the downturn and take market share. Chambers said the company still aims to invest, particularly in the U.S., India and China.

Since the slowdown hit the U.S. first, it will be the first country to recover, Chambers said.

For the latest quarter, earnings were held back by an increase in research and marketing spending even as sales rose.

Net income was $2.20 billion, down 0.2 percent from a year ago. Earnings per share were 37 cents per share, up from 35 cents per share because buybacks reduced the number of outstanding shares.

Excluding items mainly related to employee compensation and acquisitions, earnings were 42 cents per share. That exceeded the 39 cents that analysts polled by Thomson Reuters were expecting.

Chambers said the current slowdown was different from the bursting of the Internet bubble, when revenue fell as much as 45 percent in a month and a half, and a quarter of the companys customers went under.

“There are very few comparisons to 2001,” Chambers said. “The financial health of the majority of our customers is actually pretty reasonable. This is one driven by consumer and financial challenges, credit and the availability of cash.”

The growth of Internet traffic will continue, the said, and he stuck to the companys long-term 12 percent to 17 percent year-over-year growth rate.

Source: iades