Are they really ready?
Regardless of Wall Street's analysis, this is the same company that has been held up as a model of corporate strategy, management and expertise worldwide. Unlike other large technology companies that have become known for industry strong-arming or corporate arrogance--namely Microsoft and Oracle--Cisco has had a reputation for keeping its nose to the grindstone, sticking to a successful, albeit relatively boring, line of products.
To many who have followed the company since well before the Internet boom, the culprit for its change in public perception is Wall Street, not Silicon Valley.
Meta Group says although Cisco's year-to-year gains in quarterly revenue and profitability are certainly impressive, these results are a considerable drop from the company's historical growth rates.
For example, supporters of Cisco say it should never have been assumed that the networking giant could somehow sidestep the issues plaguing the industry it serves. Logic defies that conclusion, they say. As a result, a wider swath of the analyst community should have lowered its earnings estimates to begin with. Twice in January, Chambers warned Wall Street of potential difficulties in the company's second quarter because of slower sales.
Signs are everywhere that even the mighty Cisco cannot continue to grow at its usual pace among the wreckage of failed telecommunications firms, reduced spending by existing network operators and a general malaise due to larger U.S. economic concerns.
Cisco is entering the slowest revenue growth period in its history. Sales for the next two quarters are expected to remain flat sequentially, forcing Cisco executives to slash revenue growth predictions for the current fiscal year from between 50 to 60 percent to 40 percent.
Analysts say the main factors in Cisco's current financial woes are the slowing economy, a general slowdown in network equipment sales to telecommunications service providers, heavy competition from smaller niche players like Juniper Networks and Redback Networks and a recent brain drain of top-level Cisco executives.
"It shows Cisco is human," said Sagawa, "It shows all companies are capable of being affected by the economic health of the industry they're competing in. You can't grow too much faster than your customers can grow. And when you have 60 percent market share, it's hard to get more."
