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Cisco Sees Customers 'Increasingly Cautious'

Cisco Systems shares tumbled Wednesday after company Chief Executive John Chambers said the company is seeing its U.S. and European customers being "increasingly cautious."

Cisco Systems
Paul Sakuma
Cisco Systems

"We are seeing our U.S. and European customers being increasingly cautious," Chambers said on a conference call to discuss its quarterly results.

For its current, third quarter, Chambers said he expects total revenue to increase about 10 percent from the year-ago quarter. That implies third-quarter revenue of $9.752 billion.

Analysts currently expect revenue of $10.204 billion, according to Reuters Estimates, and a profit per share before items of 39 cents, on average.

Shares of Cisco dropped more than 7 percent in extended trading after closing down 0.77 percent at $23.08 Wednesday.

Second-Quarter Earnings Improve

Earlier Wednesday, Cisco posted a higher quarterly profit that matched estimates, helped by demand for its network equipment from telephone companies despite concerns a slowing U.S. economy would hurt corporate technology spending.

Before one-time items, Cisco said it earned 38 cents a share on revenue of $9.83 billion in its fiscal second quarter, compared with a profit of 33 cents a share and sales of $8.439 billion last year.

The company was seen turning in earnings of 38 cents a share and sales of $9.793 billion, according to a Thomson Financial consensus estimate.

Cisco is the world's top maker of network equipment. It derives much of its revenue from business that buy its equipment to run office networks.

Cisco shares have fallen about 28 percent since Chief Executive John Chambers said in November that the company was seeing dramatic decreases in orders from U.S. banks.

Chambers had said in November that demand from U.S. financial institutions and auto companies had slowed and that he expected demand from the U.S. enterprise segment -- including banks and retailers -- to stay "lumpy" for a while.

Cisco has been moving into new markets such as video conference and high-end video conference and also owns television set top box maker Scientific Atlanta, areas that Chambers said were paying off.

Moving into the second half of its fiscal year, Chambers said the San Jose, California-based company was in good shape with a product pipeline that is well developed, and it's seeing balanced momentum across its core and advanced technology groups.

He also said in a statement that the just-reported quarter was marked by strong revenue and order growth, paced by a broad base of geographic regions, products, services and customer markets.

- Wire services contributed to this report.

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