Cisco reports below expected earnings for Q2 2011

Company shares fell 9% on the news

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 Cisco reports below expected earnings for Q2 2011 Cisco has reported lower than expected earnings for Q2 2011 causing their share price to fall 9%. (Getty Images)
By  Georgina Enzer Published  February 10, 2011

Cisco Systems has reported below expected earnings for Q2 2011, which ends in April. The company said it expected earnings, excluding items of 35 to 38 cents per share. Analysts were expecting 40 cents a share, according to AP.

The company's shares slumped 9% on the news. Cisco said late last year that its government customers were falling away and Cisco's CEO John Chambers this week told analysts that the trend was continuing as many US states are struggling with big budget shortfalls.

"The challenges at the state, local and eventually federal level will worsen over the next several quarters," Chambers told AP.

The company also saw sales of its network switches, decline by 7% over the previous year. Chambers blamed this on a "product transition", as Cisco is moving new models into the market.

"The quarter played out as we expected. Our strategy of tightly integrating our multiple products through an architectural approach is working, and we are delivering innovation in each major product family," said John Chambers, chairman and CEO, Cisco. "As a company, we are going through a period of transition as we move aggressively in the market with our architectural strategy. We have managed these market transitions many times, positioning Cisco and our customers for success. Simply put, we are owning our evolution and the next generation of industry leadership."

Cisco has reported that revenue for the fiscal second quarter, which ended January 29, rose 6% from a year ago to $10.4 billion.

Cisco also said it earned $1.5 billion, or 27 cents per share, down 18% from $1.9 billion, or 32 cents per share, in the same quarter a year ago.

Chambers said he expected revenue for the just-started quarter to rise 4% to 6% from a year ago, a far cry from last summer, when revenue was rising 27% from the doldrums of the recession. It's also lower than Cisco's oft-stated long-term growth target of 12% to 17%.

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