Tomahawk, WI 11/14/2014 (Basicsmedia) – Sluggish consumer spending on networking and equipment are some of the problems that Cisco Systems, Inc. (NASDAQ:CSCO) is grappling with at the moment, seen by a lower than expected profit outlook for the current quarter. During an interview on CNBC, MKM Partners senior analysts, Mike Genovese stated it was not the best of quarters for Cisco in terms of earnings consequently lowering the stocks share price target to $24 from $28.
Cisco Systems, Inc. (NASDAQ:CSCO) posted better than expected earnings for the first quarter with earnings per share coming in at 54 cents a share against analyst estimates of 53 cents. Genovese took issue with the company’s second quarter earnings per share estimates of between 50 cents and 52 cents which he believes is not conservative as stated by Cisco
“I actually find the guidance next quarter for 4-7% growth to actually be fairly aggressive, management said it was conservative I actually take issue with that. It looks aggressive, and the reason is because orders only grew 1% year over year in the quarter,” said Mr. Genovese
Genovese argues that it is unlikely Cisco will register impressive growth in the current quarter having stagnated over the past three-quarters. There have been increased concerns that telecom services providers could crimp sales going forward at the back of emerging markets offering minimal growth opportunities.
Cisco Systems, Inc. (NASDAQ:CSCO) is also at the moment struggling on its enterprise and commercial business considerably denting chances of the company registering a growth of between 4-7%. U.S enterprise orders for the company turned worse in the first quarter having sunk by 1% on a year over year basis.
Cisco business continues to be immensely affected by the ongoing standoff over Net Neutrality pitying the FCC and service providers led by Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T). Cisco Systems, Inc. (NASDAQ:CSCO) has a 25% exposure to service providers meaning any standoff in the space goes along way into affecting its business. The ‘Net Neutrality’ standoff has already forced a number of carriers to reduce spending on networks considerably affecting Cisco.
“I agree that ‘Net Neutrality’ and the plan from the president will be very-very bad for telecom equipment. We had AT&T yesterday saying their capex is on pause until there is some clarity here,” said Mr. Genovese.