Network equipment maker Cisco Systems posted a 37 percent rise in quarterly profit on solid demand from telecoms carriers, but its shares fell 9 percent on concerns about its outlook amid U.S. economic weakness.
Chief Executive John Chambers told analysts on a conference call on Wednesday that he expected U.S. enterprise business to be "lumpy," and he saw "dramatic decreases" in orders from U.S. financial institutions and auto companies in the last quarter.
This contrasts with his earlier statements that the global economy was the strongest he had ever seen.
While Chambers said he was still optimistic about growth in emerging markets, he reiterated Cisco's revenue outlook for fiscal 2008, disappointing some investors who had hoped for an increase.
Cisco, which makes routers, switches and other equipment, said its fiscal first-quarter profit rose to $2.2 billion, or 35 cents per share, from $1.6 billion, or 26 cents per share, in the same period a year earlier.
Revenue, helped by Cisco's expansion into new products as well as emerging markets, rose 16.7 percent to $9.6 billion for the quarter ended Oct. 27. The company's August forecast was for revenue of $9.45 billion to $9.55 billion.
Analysts on average had forecast revenue of $9.5 billion, according to Reuters Estimates.
"The revenues are right in line with expectations. As usual the earnings beat by a penny. There does not look to be upside at this point," said Kenneth Muth, an analyst at Robert W. Baird & Co.
He said revenue from routers used by phone and cable service providers was about 3 percent ahead of his forecast but revenue from network switches, used in corporate networks, missed his estimate by about 4 percent.
"There might have been some slowdown in some of the enterprise categories," he said, noting that switches was Cisco's biggest business, contributing 34 percent of revenue.
Chambers said he expected revenue growth to remain at 16 percent year-on-year in the current quarter, and reiterated that full-year growth would be in the 13 to 16 percent range.
That compared with the average analyst forecast for fiscal 2008 revenue growth of 15.8 percent, according to Reuters Estimates.
Cisco is the world's top maker of routers and other network equipment, and has been expanding into video conferencing and new Web-based software through acquisitions of small start-ups. It also owns cable set-top box maker Scientific Atlanta.
It has also been expanding its overseas business, investing aggressively in fast-growing markets like China and India.
The shares had risen around 20 percent since the start of the year on expectations that growing Internet traffic, fueled by the popularity of Web-based video and music services, will keep driving sales of Cisco equipment.
The stock closed down 4 percent at $32.75 in regular Nasdaq trading. It further fell below $30.00 following the results.