Tomahawk, WI 11/15/2013 (BasicsMedia) – Cisco Systems, Inc. (NASDAQ:CSCO)’s first quarter in the fresh fiscal year 2014 was not fresh in most everyone’s ears and eyes. In other words, the networking equipment maker disappointed a bigger constituency this a time around. But it is not in the habit of CSCO that it disappoints, so there must have been a problem somewhere.

For several quarters, investors should recall, CSCO has been the CSCO that most everyone wants, save for its rivals. The company has made fools of analysts and their figures as it smashes their predictions in revenue and profits. Actually, for seven straight quarters, the company has reported growth in its revenue collection and better than expected earnings figures. But it is easy to forget all that superb performance now that CSCO has failed to impress.

In the Q1.14 reported Nov. 13, the company reported decline in its profit, moving from $2.1 billion a year earlier to $2 billion in the most recent quarter, thus dipping about 5%. On per share basis, the earning was $0.37 in the recent quarter against $0.39 a year earlier. Revenue went up marginally by 2% to come in at $12.1 billion, compared to $11.9 billion in the same quarter last year. Investors were looking for revenue in the region of $12.35 billion.

And then hell broke loose in the conference call when John Chamber announced the landmark outlook for this quarter, saying his company would lose revenue by up to 10%. Such reports make appetite for food to disappear. It is never the kind of thing that you attend a conference call to go home with. Nonetheless, investors have to “take it as it is”, or so they say.

NSA issue in CSCO sales decline

So what exactly is causing CSCO to cast such a dark tall shadow on the current quarter? First, there is the obvious issue that uptake of networking equipment is generally dropping across the industry. So CSCO is not alone in this. Second, is about something that the Chamber did not mention directly in the call. When the good executive said that emerging markets are expected to show weak purchase for its equipment this quarter, he meant that what NSA is doing is not good for its business. The alleged service by the security agency has caused fear in the emerging market. The now bad boy Edward Snowden leaked that the agency was using internet to spy on foreign leaders and citizens. And that internet networking equipment is the business of CSCO, there is suspicion that maybe, just maybe, the agency could be using these equipment to spy on foreign governments and their people. So as long as this remains a concern, sales of CSCO’s networking equipment is likely to suffer in the emerging markets, perhaps until the mid of F2015. These markets include Brazil and China among others and from where illegal surveillance by NSA has raise elephant issues.

Meanwhile, Cisco Systems, Inc. (NASDAQ:CSCO) is returning $15 billion to investors in shares buyback program following the approval of the same by the board. The networking company has about 5.33 billion in outstanding shares.

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