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Cisco Profit Beats but Stock Tumbles as Revenue Misses

Cisco Systems' quarterly revenue fell slightly short of Wall Street's expectations Wednesday, disappointing investors who thought an improving economy and growing Internet traffic would have spurred even stronger sales of routers and switches.

A fountain is shown at the entrance to Cisco Systems headquarters in San Jose, California.
Paul Sakuma
A fountain is shown at the entrance to Cisco Systems headquarters in San Jose, California.

The world's largest maker of computer networking equipment posted a fiscal fourth-quarter revenue of $10.84 billion, or 43 cents a share, excluding one-time items, compared with a profit of $8.54 billion, or 31 cents a year ago.

Analysts who follow the firm expected Cisco to earn 42 cents a share on revenue of $10.89 billion, according to a consensus from Thomson Reuters.

Shares of Cisco fell more than 5 percent in extended trading Wednesday. Get after-hour quotes for Cisco here.

The firm's shares closed at $23.72 in the regular Nasdaq session. Volume exceeded 56 million shares before the closing bell.

"Because it isn't as aggressive a beat as in other times but in line with the Street, the Street is probably disappointed with what they posted," said Catherine Trebnick, analyst at Avian Securities. "But I don't think it means anything is structurally broken."

"Because this year you're getting into now more normal buying patterns, I think the results probably reflect that more than anything else," she continued.

Cisco shares are down around 6 percent so far this year, due to worries that slower growth in Europe and China could hurt a nascent recovery in global technology spending.

Cisco is considered one of the technology sector's prime bellwethers due to its broad, global operations. Since Cisco's latest results are for the full month of July, instead of June for many of its peers, they are also seen as an early indicator of industry trends.

In addition to selling network equipment, the company has been expanding into new areas such as data center servers, and acquiring companies like Norwegian videoconference company Tandberg, to bolster its product line and maintain double-digit sales growth.

—Wire services contributed to this story.