Shares of Cisco are down 13% in the first few minutes of trading.
The tech behemoth announced better-than-expected fiscal Q1 earnings after the closing bell on Wednesday. However, revenue was weak and its fiscal Q2 guidance was ugly.
“Overall, Asia-Pacific, Japan and China was down 10%,” said CEO John Chambers on the earnings conference call. “China continued to decline as we and our peers worked through the challenging political dynamics in that country.”
Chambers is referring to the revelations of recent leaks related to spying by the National Security Agency.
“Every one of our top 10 emerging countries missed their forecast and was off by a fair amount,” said Chambers. “So it wasn’t just that it was down, the last couple of weeks, they kept dropping and dropping.”
“As we look to Q2 FY’14, we do not anticipate material improvement in our order growth. This is impacting our revenue guidance for Q2.”
Here’s what Cisco sees in Q2:
- Revenue: Down 8% to 10% year-over-year
- Gross margin: 61% to 62%, non-GAAP
- Operating margin: 27.5% to 28.5%, non-GAAP
- EPS: $US0.45 to $US0.47, non-GAAP
“We suggest you model revenue conservatively,” warned Chambers.
Here’s a look at the premarket chart from MarketWatch: