Customers cautious due to trade war, Brexit

Cisco Systems Chairman and CEO Chuck Robbins told CNBC on Thursday the company’s larger customers are pausing their spending plans due to global economic uncertainties.

“They’re just expressing caution that they’re concerned about what’s going on in the macro environment,” Robbins said on “Squawk on the Street.”

Dow stock Cisco tumbled after the technology conglomerate late Wednesday reported fiscal second-quarter earnings that came in below estimates and lowered forward guidance. Cisco blamed the disappointing results on reticence in the face of a slowing global growth — partly based on fears of that Britain’s exit from the European Union and the U.S.-China trade war won’t get solved.

“We don’t see anything in the short term that will definitively resolve the issues we’re seeing around the world,” Robbins said. Though he did says that progress on a “phase one” trade deal between the world’s two largest economies “would help” with customer confidence.

Shares of Cisco were down more than 7% on Thursday morning and on pace for their worst day since mid-August. Cisco is up almost 5% year-to-date compared to the S&P 500’s nearly 24% advance in 2019.

Robbins cited similar global pressures when speaking to analysts on Wednesday’s post-earnings conference call. Cisco saw “a bit of a pause” in the quarter and that some large deals were made but “got done smaller,” he said.

Beijing and Washington are working to cement a “phase one” trade deal, which was announced in principle last month. However, negotiations have hit a snag over a number of issues.

The U.S. is trying to secure stronger commitments from China on intellectual property protections, amounts of agriculture purchases, and an end to what it sees as forced technology transfers. China wants a rollback of tariffs, while reportedly balking on putting a specific number on farm good buys. Washington has placed tariffs on more than $500 billion in Chinese goods. Beijing has put duties on about $110 billion in American products.

In August, Robbins told CNBC that Cisco saw an impact on its business in China due to the ongoing trade war.

“We certainly saw an impact on our business in China this quarter. A lot of state-owned enterprises, I think where they have options, they’re choosing local manufacturers,” Robbins said at the time. “We don’t know if that’s a short-term thing or a long-term thing.”

— CNBC’s Jordan Novet contributed to this report.