Shares of Cisco plunged 9% after hours yesterday when the company warned of a cautious business outlook, slowing revenue, and trouble in Europe on the company conference call.Probably the best summation of the company’s perspective on things right now came in this question and answer, via Seeking Alpha.
Tal Liani – BofA Merrill Lynch, Research Division
My question is about the environment. If I do the maths right, you’re guiding for product revenues to be down 3%, 4% sequentially, making some assumptions on services. What’s the risk that the environment is just trending down, given that the portfolio is in such a good shape right now? What’s the risk that we’re just going to have another downturn like we had 2 to 3 years ago?
John T. Chambers
Tal, it’s a very fair question, obviously one that we’ve looked at very, very much over the last several months. When I talk to our customers, they do not see that occurring in their environment, and they traditionally, even the areas that have been going slow like service providers and also the financial services industry group, have said their plans are to spend more in the second half of the year. However, Tal, in the very next sentence they said, we are waiting to see what happens in Europe and what happens with government policy. So there’s nothing that we see in this environment that indicates either on our behalf. Our product portfolio, as you said, is the most competitive ever. And we think as the new market share numbers come out, we will gain share in the majority of the market areas when they reported is in very good shape. The service providers, I think, we’re in the strongest position, and I think you’ll see us maintain that. And almost across every product area, we are continuing to gain share of mind and usually market share. In the commercial marketplace, if their business is good, they spend. So again, when we look at it, Rob, we saw good spending in the commercial marketplace especially in the beyond the top 2000 Fortune type of accounts. The public sector was a little bit better than we thought, but Tal, in terms of your modelling, we view it as pretty flat as you go forward. There will be segments that will be up and segments that will be down. We’ll probably talk about that in Q&As a little bit later. The enterprise is one that had changed in terms of consumer IT confidence, in terms of customer IT confidence on spending versus the last quarter, and that’s got a little bit tougher. When I talk to my peers in the industry, make no mistake, I’ve been doing that; we can almost finish each other’s sentences on what we’re seeing around the globe from the enterprise customers. Again, not a view that things are turning down, but just very steady improvement and an uncertain and cautious wait-and-see type of environment from that perspective. So while we will always watch the numbers, Tal, and we do worry when you see a trend occurring that it can be an indication of a bigger issue, I think right now I’d classify it as uncertainty and looking to see more certainty on the global economy and in Europe and secondly, more certainty in terms of government policies that can have major impacts on their business. So it’s a nice way of saying that we’re not sure. We sure don’t like the trend in the enterprise IT spending, although we think in our product areas, we control our own destiny in terms of share of market.
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