Why Cisco (CSCO) Lowered Its Revenue Outlook

NEW YORK (TheStreet) -- During Cisco's (CSCO) annual analyst meeting CEO John Chambers said the company is "extremely challenged" in emerging markets.

While demand is strong in the U.S., Cisco has seen a 12% year-over-year drop in orders in emerging markets such as Russia and Brazil in its Oct. quarter. The company also saw an 18% drop in orders from both China and India. Chambers expects emerging markets to grow by 6% to 10% when the company recovers.

Chambers admitted earlier that sales in China declined following the recent NSA scandal. He claimed the scandal had no effect on other markets, however.

Cisco CFO Frank Calderoni said the company is now target annual revenue growth of 3% to 6% over the next 3 to 5 years during the analyst meeting, down from a previous estimate of between 5% and 7%. The company's revenue growth for fiscal year 2014, ending July 2014, is "basically" in line with forecasts of a 4% decline, according to Calderoni.

The company is now aiming for services revenue growth of 7% to 10% bovver the next 3 to 5 years, which is down from 9% to 11%. Cisco expects its cloud and cloud-enabling technologies will show a growth rate of between 12% and 18%.

TheStreet Ratings team rates CISCO SYSTEMS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CISCO SYSTEMS INC (CSCO) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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