Cisco Warns on Earnings, Economy

Back in August, when Dell reported a global slump in technology spending I asked the question "Is Dell the Canary in The Coal Mine for Tech?" It should come as no surprise given what happened to the global economy in September and October that Dell's announcement was a sign of things to come. Yesterday Cisco confirmed what Dell warned about back in August.

Cisco First-Quarter Sales Growth Slowest in 3 Years

Cisco Systems Inc., the world's largest maker of networking equipment, said first-quarter sales rose at the slowest pace in three years and revenue this quarter will drop as the slumping economy crimps customers' budgets.

Second-quarter sales will decline as much as 10 percent from a year earlier, Chief Executive Officer John Chambers said today on a conference call. The shares sank in late trading.

``It is the second most difficult time in my career in terms of the forecast,'' Chambers said. Cisco sales also slumped after the dot-com bubble burst in 2000.

We will continue to see these kinds of company announcements about earnings. Many have suggested that this is priced into the market but analysts have yet to fully discount the extent to which earnings will suffer in 2009 as the world economy experiences recession.