by Calculated Risk on 2/06/2008 05:17:00 PM

From MarketWatch: Cisco shares fall on disappointing revenue forecast

Cisco ... issued a lower-than-expected revenue forecast for its third fiscal quarter, citing the slowing economy. ... CEO Chambers said order-growth rates in the month of January were below expectations, leading the company to be cautious about the outlook for the next few months.

There are two categories for non-residential investment: 1) Structures, and 2) Equipment and Software. I've written extensively about the looming slowdown in non-residential structure investment, and these CISCO comments suggest a possible slowdown in Equipment and Software investment too.

Update: comments from conference call (hat tip Brian)

“While we continue to be extremely comfortable with our vision and differentiated strategy, the value that intelligent networks will bring across all of our customer segments and geographies, we also see the economic challenges that the U.S. is experiencing. Our customers in many of the emerging countries, especially in India and China and the Middle East , remain optimistic about their business momentum. However, we are seeing our U.S. and European customers become increasingly cautious. This was my key take-away from the World Economic Forum two weeks ago. While we were pleased with our revenue growth slightly above 16% in Q2, our product order growth in Q2 was in the low teens. The second quarter was unusual by month in terms of these order growth rates. December was strong, with year-over-year growth in terms of orders in the high teens. Our January growth was less than we expected, with order growth rates of approximately 10%. Again, let me repeat, with our usual caveats discussed earlier, that we continue to believe in our long-term growth guidance at 12% to 17%. While it is always possible that January's order growth rates were an aberration, given the uncertainties of the global financial markets and the cautiousness we are seeing from some of our customers and our peers, we believe that the proper approach to guidance, with our usual caveats at this point in time, is to assume that January's order growth rates may continue over the next several months…Secondly, with all of the appropriate caveats, our best estimate is that this is a relatively short-term challenge going forward… Therefore, our revenue guidance for Q3 fiscal year 2008, including our usual caveats as discussed earlier and in our financial reports, is for revenue growth of approximately 10% year-over-year..”

He later added:
-this is the first time in a long time that they have missed a Janaury forecast

-that he didn’t think things would get worse from here and that the slowdown might be a one or two quarter event

-the US financial sector actually did better than expected, retail and transportation were worse….what we are seeing on a broader basis is a confidence issue with CEOs driven by what they are reading and hearing

-in Europe and US,saw orders slip at the end of January, particularly after the stock market swoon over MLK weekend