Cisco CEO John Chambers says political repercussions from leaks about the United States spying on foreign governments will impact its second fiscal quarter revenue – especially in China.
The networking major on Wednesday warned that its global revenue would decline between 8 percent and 10 percent in its second fiscal quarter. Emerging markets including China is a concern for Cisco.
Earlier, Huawei, a Chinese telecom equipment vendor, faced similar pressure in select mobile markets including the U.S. due to its alleged association with the local government and security challenges it posed.
In the first quarter of fiscal 2014, Cisco revenue increased 1.8 percent to $12.1 billion, while net income dipped 4.6 percent to $2 billion from a year-ago period.
Reuters reported that John Chambers blamed weak demand in emerging markets such as China, saying companies there have become more hesitant to buy Cisco products due because of political repercussions from leaks about the United States spying on foreign governments.
Chambers said that in other countries, where the political impact was nominal, Cisco is seeing a slowdown in decision making due to macro economic issues there.
The executive also cited a big decline in revenue from set-top box (STB) sales as the company walked away from less profitable contracts in that market.
He said Cisco’s orders fell dramatically toward the end of the first quarter because of big declines in many of its most important emerging market countries. India is one of the main markets for Cisco. But Cisco did not share specific details about India.
Cisco also said revenue for the first quarter rose less than expected due to weak demand in emerging markets such as China and the recent U.S. government shut down’s chilling effect on business spending.
Chambers said that while the partial U.S. federal government shut down directly cut a smaller than expected $50 million off Cisco’s revenue it also dampened demand from non-government customers.
Cisco said its latest earnings included pre-tax charges of $237 million related to a plan it announced in August to cut 4,000 jobs or 5 percent of its workforce.
Pix: Bloomberg
