Networking vendor Cisco Systems on Thursday cut its long-term revenue growth target to 3 percent to 6 percent per year from 5 percent to 7 percent.
Earlier, Cisco CEO John Chambers said the American administration’s involvement in the spying issue will hurt the company’s revenue growth in China. Media also reported that besides Cisco, companies like IBM will face music in the China market.
Cisco Chief Financial Officer Frank Calderoni cited macro-economic pressure in emerging markets, conservative customer budgets and service provider market dynamics for the change.
Cisco has cut revenue target despite John Chambers saying on Thursday that the company was beginning to see the recovery of the U.S. market. Chambers had cited challenges in emerging market economies such as Russia and Brazil.
He did not mention about India, which is going through a tough patch due to regulatory issues and lack of confidence to spend in IT. In the last two quarters, Cisco revenue from India declined. In the latest quarter, decrease in revenue was in line with Cisco’s performance in emerging markets such as Brazil and Russia.
According to a Reuters report, while emerging markets were extremely challenged right now, he expects them to grow 6 percent to 10 percent when they recover, Chambers said.
For the U.S. market, Chambers cited strong growth prospects in the enterprise market, as its sales pipeline for big deals, of between $1 million to $5 million, in that segment is up 20 percent or more. Enterprise customers account for about 23 percent of Cisco’s overall revenue.
Cisco on November 13 warned that revenue would fall as much as 10 percent this quarter and could keep declining for several quarters. The company blamed factors from emerging economy weakness and political backlash in China to company-specific problems, such as market-share losses in network equipment and declining sales in set-top boxes.
Aside from emerging markets, Cisco’s biggest problem in the quarter was a 13 percent decline in sales to service providers, which represent about 31 percent of Cisco’s overall revenue.
Chambers said the drop in demand from service providers included a 6 percent decline in sales of set-top boxes, a 2 percent decline relating to its launch of new products and a 2 percent decline due to a loss of market share in equipment used at the edge of telecom operator networks.
Cisco during the analyst meet did not share specific roadmap to improve revenue.
