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Cisco Plummets on Top Line Losses

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Cisco Plummets on Top Line Losses

Shares of Cisco (NASDAQ:CSCO) were sent straight to the downside on Thursday morning following the company’s second quarter report. The company reported a steep drop in revenues and consequently a number of prominent brokerage firms and investment bankers flipped sides on the name. Cisco posted fiscal first-quarter earnings, excluding items, of 53 cents per share, up from 48 cents a share in the year-earlier period. On the top line revenue increased to $12.09 billion from $11.88 billion a year ago. These results came in lower than Analysts had anticipated the network equipment maker to report earnings excluding items of 51 cents a share on $12.34 billion in revenue, according to a consensus estimate.

Net income dropped to $2 billion from $2.1 billion in the year-ago period. Goldman Sachs (NYSE:GS) was one of the prominent brokerages that cut price targets, the firm dropped Cisco to $25 from $30. Moreover, the firm removed the stock from its Conviction List of top picks, citing “reduced confidence in the near-term trajectory”, but Goldman analysts maintained their “buy” rating.

Going into the weekend it is likely we see a number of analysts update their price estimates. Up until today the company had been performing well. Year to date shares of the company were higher by more than 20 percent. Expect higher volatility and a greater number of price swings in the coming days. Increasing competition and emerging market weakness continue to weigh on the top line. Time will tell if the company can recoup its losses in these areas. A number of telecommunications competitions have begun to directly compete with Cisco’s line of products. Companies such as Aruba Networks Inc (NASDAQ:ARUN) , Alcatel-Lucent SA (NYSE:ALU) , Brocade Communications Systems Inc (NASDAQ:BRCD) , Ciena Corp (NYSE:CIEN) , F5 Networks Inc (NASDAQ:FFIV) , Riverbed Technology Inc (NASDAQ:RVBD) and Juniper Networks Inc (NYSE:JNPR) . have made a dent in earnings per share.

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