Network equipment maker Cisco Systems CEO John Chambers last night unsettled investors by warning of lower public spending and weaker margins from tough competition.
Chambers upset investors last August with a warning of 'unusual uncertainty', and followed up last quarter with a weaker than expected outlook that he blamed on weak orders from debt-burdened government agencies.
'Unfortunately, we believe that our concerns in the public sector will continue to be challenging in the developed world for the next several quarters,' he said after the release of the company's second quarter figures, adding that Cisco's government accounts in the US, Europe and Japan had all been hit.
Chambers is one of Silicon Valley's longest-serving executives, and investors take his views on industry trends seriously. He was one of the first tech executives to flag the impact of the financial crisis on the sector in late 2007.
Investors have also looked to Cisco for signs of overall technology spending due to the breadth of its customer base, which ranges from small US businesses to foreign governments.
Cisco's second-quarter gross margin fell to 62.4% from 64.3% in the previous quarter, raising analysts' concerns that growing competition may be forcing the company to cut prices to protect market share.
Cisco also let down investors with a third-quarter outlook of earnings excluding items of 35 cents to 38 cents per share, below Wall Street expectations for 40 cents. And it said sales growth for the full year was likely to be at the mid- to low-end of a previous 9 to 12 percent outlook.
Revenue for the quarter ended January 29 rose 6% from a year earlier to $10.4 billion. Quarterly net profit fell to $1.5 billion from $1.9 billion a year earlier.
