Cisco Tanks as Sales Miss Estimates on Weak IT Spending (Update 2)

Tickers in this article: CSCO

This story has been updated with Cisco's share price, business segment performance and conference call comments on the impact of the NSA controversy in China.

NEW YORK ( TheStreet) - Cisco shares tanked after the networking giant missed Wall Street's first-quarter revenue estimate, weighed down by the weak spending that has hurt rival tech heavyweights such as IBM

Cisco shares, which closed up 1.12% during Wednesday's session, were off 10.27% to $21.53 in after-hours trading.

The gearmaker reported revenue of $12.1 billion, an increase of 2% on the prior year's quarter, but below analysts' forecast of $12.34 billion. 

Excluding items, however, Cisco reported earnings of 53 cents a share, up from 48 cents a share in the prior year's quarter. Analysts surveyed by Thomson Reuters were looking for earnings 51 cents a share. 

"While our revenue growth was below our expectation, our financials are strong, our strategy is strong and our innovation engine is executing extremely well," said Cisco CEO John Chambers, in a statement released after market close. "We remain confident in our long-term goal to be the #1 IT company in the world and help our customers solve their biggest business problems." 

Revenue from Cisco's switching business grew 3% year over year to $3.75 billion while its Next-Generation Network (NGN) routing sales declined 1% to $2.04 billion. Collaboration product revenue crept up 1% over the same period to $1.03 billion, while service provider video tumbled 14% to $987 million. Cisco's data center revenue, however, climbed 44% to  $601 million, lifted by its UCS server product.

Speaking during Cisco's conference call, Chambers highlighted the "inconsistent" macro environment that has affected some of the company's peers this earnings season. The recent federal government shutdown also impacted Cisco by approximately $50 million, he added, noting that Washington's problems exacerbated the "lack of confidence" from business leaders over the last few quarters.

Weakness in emerging markets also weighed heavily on Cisco's numbers, as did the challenge of managing through new product cycles in the service provider space.

During the earnings conference call an analyst asked Chambers whether the recent NSA snooping controversy had affected the company's business in China. "It was an impact on China, I think we're all aware of that," he replied. "It's total impact on the emerging market business was fairly nominal."

Cisco delivered underwhelming second-quarter guidance, predicting revenue between $10.89 billion and $11.13 billion. Analysts surveyed by Thomson Reuters are looking for sales of $12.6 billion.

Excluding items, Cisco expects earnings of 45 cents a share to 47 cents a share, well below analysts' forecast of 52 cents a share.

The company also delivered non-GAAP earnings guidance of $1.95 to $2.05 a share for fiscal 2014, below analysts' projection of $2.10 a share.

Cisco also announced that its board has authorized $15 billion in additional stock repurchases. The company's board had previously authorized up to $82 billion in stock repurchases.