The tech industry could be facing a downturn after Cisco announced some lacklustre predictions for the fourth quarter.
Cisco showed sales for the three-month period ending 27 July climbing six percent to $13.4 billion. But CEO Chuck Robbins said that the last month of the quarter “didn’t feel like a normal Q4 finish”, triggering Q1 revenue growth guidance of between zero and two percent.
Most of the issues were about China and US President Donald Trump’s trade war. Cisco said that in Q4 sales in China tanked 25 percent, and enterprise revenue across the business declined two percent.
Robbins said: “[In] the enterprise business we saw weakness in China, which contributed to it. We saw some weakness in the UK in enterprise. Candidly in the US, as much as I don’t want to use compares for an excuse, we had two major software deals a year ago that were tough to compare against. The rest of the business and everything that we see is still very positive and we feel good about where we are.”
Cisco had so far avoided any negative impact from external factors such as the US-China trade war and Brexit, posting strong Q2 and Q3 numbers.
Three months ago Cisco said it had moved a large proportion of its manufacturing away from China to minimise the impact of Trump’s tariffs, but Robbins said on the latest earnings call that its business with Chinese service providers and telcos is falling at a rate.
Cisco’s China business accounts for around three percent of its total revenue, but Robbins said a decline is enough to have an impact on the wider business in the short term – adding that he does not see it as a long-term concern.
He also said that Cisco is “being uninvited to bid” on contracts with Chinese state-owned enterprises.
