Cisco Systems reported third-quarter sales and profits that edged past Wall Street's targets but a conservative outlook for revenue growth in the fourth quarter disappointed investors.

Cisco CEO John Chambers said U.S. businesses continue to tighten their budgets. "When I talk to my customers, they're modeling for the rest of the calendar year, and it's a little tougher," Chambers said during a conference call with analysts. "It shouldn't surprise us that [U.S. spending] for the next quarter or two will be challenging."

Sales for the third quarter, which ended April 26, came in at $9.8 billion, up 10.4% from a year ago and slightly ahead of analysts' estimates of $9.75 billion, according to Thomson First Call.

Cisco posted a quarterly profit of $1.8 billion, or 29 cents a share, down 5.4% from $1.9 billion, or 30 cents a share, in the year-earlier period. Profits slipped due to a $248 million acquisition charge of Nuova Systems, which develops products for data centers.

Adjusted earnings, which exclude certain gains and charges, came in at 38 cents a share, which surpassed analysts' projections of 36 cents a share.

Chambers said he anticipates sales to grow 9% to 10% for the current quarter, which ends in July. His cautious guidance met analysts' expectations for 9% growth.

Due to a slowdown in orders from large North American and European corporate customers, Chambers has given tepid revenue guidance the last two times Cisco reported results. "This is a relatively short-term challenge going forward," he said.

A pull back in tech spending meant fewer orders for Cisco. High-tech equipment orders from service providers slowed, down 3% for the quarter from the same period a year ago. "I was pretty surprised by that since that segment of the market has been performing pretty well," said Erik Suppiger, a senior research analyst with Signal Hill. "It's tough to envision Cisco really seeing a significant recovery until the U.S. economy comes back."

By: DocMemory
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