Cisco Systems chief executive John Chambers forecast revenue will drop far more sharply in the current quarter than Wall Street expected, and said the network equipment maker is cutting up to 2,000 jobs.
The forecast on Wednesday pushed Cisco shares down 4 per cent in after-hours trade as investors feared the world's biggest maker of routers and switches may be facing a 2001-style freeze in technology spending.
Cisco's warning also dragged down Nasdaq and Standard & Poor's 500 index futures, suggesting some turbulence could hit the tech sector on Thursday.
"The environment is very challenging and there are several regions of the world that are still deteriorating. Before things get better the situation needs to stabilize, and we're not there yet," said Mark Sue, an analyst at RBC.
Chambers told analysts on a conference call that he expects revenue in the current, fiscal third quarter to fall 15 per cent to 20 per cent from a year ago - much worse than the average analyst forecast for a 10.5 per cent fall to $8.8 billion.
He said economic weakness had spread beyond the United States and Europe. "Being very candid, no one, including us, knows how long it will last," he said.
Chambers said a majority of Cisco's customers seemed to expect a recovery in 2010, and that a smaller group expects an upturn in 2009. Ever the cheerleader of Silicon Valley, the 59-year-old Chambers said he was slightly more optimistic than his customers, although he added that it was one of the most difficult times in his career to give an outlook.
Cisco is one of the first tech companies to report results that include most of January, making it an early indicator of trends in technology spending.
Cisco said product orders in January fell 20 per cent from a year earlier, accelerating from a 11 per cent decline in December and indicating global technology spending was off to a weaker-than-expected start in 2009.
Reuters