Cisco Dashes Hope for Tech Turnaround

Cisco (CSCO) slashed its sales forecast as the global economic slowdown continues to spread.

On an earnings conference call CEO John Chambers said the expanding economic slump has been a challenging environment for most of Cisco's customers.

Orders in the fiscal second quarter fell 14% and worsened as the quarter progressed, Chambers said. The order to shipment rate or book-to-bill ratio fell below one in the quarter, a common indicator that sales momentum is slowing.

Chambers said he now expects sales for the fiscal third quarter to be down 15% to 20% compared to year-ago levels. This puts projected revenue at roughly $8.1 billion, well below analysts' expectations for sales of $8.7 billion.

After saying the downturn is "the biggest challenge of our lifetime," CEO John Chambers emphasized that it was also the biggest opportunity to prepare the company for the eventual upturn in business.

The comments came after the San Jose, Calif., networking gearmaker posted earnings, excluding one-time items, of 32 cents a share, compared to 38 cents a share in the year-ago quarter and analysts' expectations for pro forma profit of 30 cents, according to Yahoo! Finance.

Sales for the second quarter ended last month were $9.1 billion, down from $9.8 billion a year ago and just above analysts' targets of $9 billion.

"Cisco showcased solid financial strength during a period of significant economic challenge," said CEO John Chambers in a press release.

Tech investors see Cisco, with its broad global reach and roster of customers from big businesses to telcos, as having a good view on the health of IT spending. The credit crises and sluggish economy have added to concerns that orders for new equipment will continue to dry up.