Sector Snap: Cisco guidance hits tech stocks
NEW YORK (AP) — Technology stocks slumped Thursday after Cisco Systems gave a fiscal-year outlook that one analyst described as "shockingly weak."
The San Jose, Calif., company is regarded as a bellwether for the technology industry because it cuts a broad swath, selling routers, switches, software and services to corporate customers and government agencies.
Its fiscal quarters end a month later than most other major technology companies, which gives the company more time to assess economic conditions.
Cisco Systems Inc. reported after the markets closed Wednesday that its adjusted net income improved and revenue rose 2 percent to $12.09 billion, but that was about $250 million less than analysts expected.
Cisco forecast an adjusted profit of $1.95 to $2.05 per share for the fiscal year ending in late July. FactSet says analysts expected $2.10 per share on average.
Cisco shares fell $2.85, or 12 percent, to $21.15 in midday trading Thursday.
Elsewhere in the sector shares of Citrix Systems Inc. declined $2.94, or 5.1 percent, to $55.08 and Microsoft Corp. stock lost 30 cents to $37.85. NetGear Inc. shares fell 42 cents, or 1.3 percent, to $30.88 and Hewlett-Packard Co. stock slid $1.43, or 5.4 percent, to $25.06. Juniper Networks Inc. shares retreated 27 cents, or 1.4 percent, to $19.02 and VMWare Inc. shares skidded $2.21, or 2.8 percent, to $77.36.
Pacific Crest Securities analyst Brent Bracelin called Cisco's revenue outlook "shockingly weak." He said the company experienced lower orders from emerging markets and from service provider businesses, especially video. He said Cisco's business will reach a low point in the January quarter and should get better from there. He maintained an "Outperform" rating on the shares but cut his target price to $27 per share from $30.
Matthew Robinson of Wunderlich Securities said Cisco's orders decreased in almost every reported category. He said demand from emerging markets like China was the biggest problem, but IT orders from the U.S. also fell in the wake of the ongoing National Security Agency spying scandal. Robinson rates the shares "Buy," and trimmed his price target to $25 per share from $28.
Cantor Fitzgerald' analyst Brian White said the guidance might signal an industry-wide downturn is approaching. He rates Cisco shares "Buy," but lowered his price target to $26 from $29.50.