Cisco Systems shares absorb punishing beatdown

Networking equipment giant plunges more than 16% on Wall Street after weak sales forecast


Investors couldn't sell off shares of Cisco Systems (NASDAQ: CSCO) fast enough Thursday following a weaker-than-expected sales forecast delivered by Chairman and CEO John Chambers after Wednesday's market close.

Cisco finished trading Thursday down 3.97, or 16.2 percent, to 20.52. According to MarketWatch, it was Cisco's worst day on Wall Street since July 1994. The selloff reduced Cisco's market capitalization at the final bell to $117.2 billion from $139.9 billion. During Wednesday's earnings call following the release of the company's fiscal Q1 results, Chambers predicted year-over-year sales growth for the second quarter of 3 percent to 5 percent, dramatically below consensus estimates of a 13 percent sales increase. This prompted panic among investors that the sluggish economic recovery was holding back a rebound in the corporate market. The reaction of analysts has ranged from shock that Cisco's guidance was so far below estimates to reassurances that the setback was temporary. Nonetheless, several analysts downgraded Cisco shares after the Q1 earnings call. The company on Wednesday reported Q1 net profit of $1.93 billion, or 34 cents a share, up 7.8 percent from last year's first-quarter earnings of $1.79 billion, or 30 cents a share. Cisco's adjusted income for the first quarter was 42 cents a share, while revenue was $10.75 billion, up 19.2 percent from $9.02 billion last year. Consensus forecasts called for earnings of 40 cents per share on revenue of $10.75 billion.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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