Cisco Profits Fall 24%, Sales by 22%

As it been quietly informing partners, customers and analysts over the last few weeks, Cisco Systems' sales performance slipped during the last three months, with its profits falling 24 percent during the fiscal quarter that ended April 25.

Cisco, by far the world's biggest supplier of IT networking hardware and software,  reported earnings of $1.35 billion, or 23 cents per share, down from $1.77 billion or 29 cents per share a year earlier.

Cisco's revenue fell 17 percent to $8.16 billion from $9.8 billion a year ago—right in line with its February fiscal prediction of a drop of between 15 and 20 percent. Product sales decreased by 22 percent, while service maintenance sales climbed by 9.4 percent.

However, the company's extraordinarily high gross profit margins were unchanged by the sales slowdown. Cisco reported gross margins of 64.1 percent compared with 64 percent  a year ago, slightly above the company's projection.

Cisco, among the world's most stable and successful IT companies, is nonetheless on a downward trajectory in sales. Last fiscal quarter, the company reported a year-over-year drop-off in sales of 7.5 percent, compared with a gain of 8 percent in the first quarter.

Cisco is not the lone sufferer in its sector. Analysts have noted that the networking business in general has suffered a major slump during the recession because many enterprise customers are holding off on purchasing network upgrades—which are nice to have but often not critically necessary to the performance of an enterprise.