Cisco Systems, the networking equipment maker, warned investors on Wednesday that it could be facing a bigger drop-off in sales in coming months even than it has experienced so far during the coronavirus crisis.

The downbeat prediction stoked the growing unease on Wall Street about a broad downturn in IT spending in the second half of this year, and wiped about 6 per cent from Cisco’s share price in after-market trading.

For the most recent quarter, to the end of July, Cisco did better than most analysts had expected, although its revenue still dropped by 9 per cent from a year before. Its revenue of $12.2bn, and pro forma earnings per share of 80 cents, were ahead of the $12.08bn, and 74 cents, that had been forecast. Net income rose 19 per cent to $2.6bn.

Chuck Robbins, chief executive, said the company had shown “operational resilience” during its fiscal year, which ended in July.

In a statement issued before a call with investors, he also hinted at a reassessment of the company’s product direction, as he said that Cisco was “rebalancing” its research and development spending “to focus on new areas”.

For the first quarter of its new fiscal year, Cisco indicated that it was likely to record a revenue decline of 9 to 11 per cent, pointing to revenue of between $11.7bn and $12bn, and pro forma earnings of 69 to 71 cents a share.

Most analysts had been expecting revenue of $12.25bn and earnings of 76 cents.

Until recently, many investors had been expecting a solid rebound in IT spending in the second half of this year as sales of equipment like servers, storage gear and networking equipment recovered from the immediate effects of the pandemic.

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Those hopes have started to fade, however, following an earnings season that has seen many tech suppliers strike a cautious note about the rest of 2020.

Via Financial Times