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Cisco's challenges multiply as outlook disappoints

Despite solid first-quarter earnings, CEO John Chambers outlines challenges his company is facing regarding government spending, service providers, and Europe.

Cisco Systems delivered solid first-quarter earnings and said it is focused on "execution in the areas we can control." In other words, capital spending is tailing off for some of Cisco's businesses. And one of the areas where it's becoming most evident is government spending.

The company reported first-quarter net income of $1.9 billion, or 34 cents a share. Non-GAAP earnings were 42 cents a share. First-quarter revenue was $10.75 billion, up 19.2 percent from a year ago. Wall Street was expecting earnings of 40 cents a share on revenue of $10.74 billion.

In a statement, Cisco CEO John Chambers said he was pleased with the company's "solid financial results during a challenging economic environment."

But in a call with analysts, he was clear about "challenges" the company is facing, notably government spending, service providers, and Europe. Globally, orders in the public-sector segment were up 6 percent, and growth in U.S. federal-government and emerging markets was "solid." Orders from U.S. state governments, however, were down about 25 percent.

Read more of "Clearwire: Subscribers surge, but so does cash crunch; Here come layoffs" at ZDNet's Between the Lines.