Following the recent drastic cut in its quarterly forecast from revenue growth to loss, Cisco has also downgraded its outlook for long-term growth. The company now expects compound annual revenue growth of 3–6% instead of 5–7%. Chief financial officer Frank Calderone predicted that what growth the company does see will be in areas beyond its core routing and switching business, according to Network World. Top growth prospects include data center products and security. Calderone expects the core business to remain unchanged or see minimal 1% growth. The company’s stock has seen a steady decline since the mid-November announcement of a poor quarterly outlook. Over the past three months, the stock price has fallen almost 17%.
According to many industry observers, as goes Cisco, so goes IT. The moderate long-term growth rate for revenue is certainly better than a decline as far as investors are concerned, but at the lower end of the outlook, revenue gains come up against the inflation rate. Also broader economic uncertainty continues to take its toll; despite stock market indices that have exceeded their highs from just before the recession, a gloomy employment picture and questions about national debt and other fiscal issues make betting on growth a shaky proposition.
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