When you’re as big as Cisco Systems (NASDAQ:CSCO, news, filings) and your CEO has a reputation for a very optimistic view of the future of bandwidth, and the market depends on you to to balance the forces of pessimism, it doesn’t take much in the way of weak results to cause trouble. In its fiscal Q4 results, Cisco beat earnings per share expectations by a penny, and came in with revenues of $10.8B – just below expectations of $10.9B. It was above guidance, but in the strange game of Cisco expectations it was below par. But really it was the forecast that has spooked people the most.
Cisco says it doesn’t expect a double dip recession, however orders slowed in June and into July due to concerns over European bonds before picking up again. They bundled their doubts about the economy and their customers’ mood into the phrase ‘unusual uncertainty’. It’s kind of like saying it’s not going to rain, but the sky looks funny so everyone should definitely bring an umbrella and maybe hide in the storm cellar. Is that enough to justify what appears to be a broad market retreat? Well, not by itself perhaps – Cisco was just the trigger, people have been getting very antsy all summer.
What I don’t know yet is whether this suggests carriers will respond with a double dip in spending for bandwidth growth, repeating late 2008 into the first half of 2009. Even if the macro economic conditions worsen further, I don’t think network operators have as much leeway right now in their network planning as they did before. Spending has returned but it hasn’t exactly roared back and overshot the mark, so bandwidth growth should more directly force spending this time if things do go south.
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