The backlash in emerging markets against U.S. surveillance could be behind Cisco Systems, Inc. (NASDAQ:CSCO)’s gloomy sales forecast.

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David Meyer of Gigaom feels the standout reason behind Cisco’s gloomy sales forecast is the backlash in emerging markets against the activities of the U.S. signals intelligence agency, the NSA.

Cisco’s weak outlook

Cisco Systems, Inc. released its earnings numbers yesterday for the first quarter of 2014 topping EPS estimates by 2 cents.

However, in its second quarter earnings report, Cisco Systems, Inc. (NASDAQ:CSCO) told investors that the outlook for 2014 was not all that positive.

David Meyer of Gigaom feels though there could be variety of reasons for Cisco predicting a 10% sales slump during the current quarter, the backlash over U.S. surveillance has definitely hit orders in China. Orders in other developing countries have also plummeted with the NSA being cited as a cause of uncertainty, at the very least.

David Meyer points out that communications infrastructure is absolutely central to the surveillance scandal, which is Cisco’s core business.

BMO lowers Cisco’s target price

Tim Long, Ari Klein and Alex Spektor of BMO Capital Markets in their recent research report feel Cisco Systems, Inc. (NASDAQ:CSCO)’s revenue fall of 8 to 10% year-on-year was witnessed earlier only during the financial crisis and the telecom bust.

The analysts state that Cisco posting a disappointment quarter is not terribly surprising, though the exceptionally weak guidance was much unexpected.

Cisco Systems, Inc. (NASDAQ:CSCO) reported revenue of $12.085 billion, below the analysts and consensus estimate of $12.38 billion. The analysts point out that the shortfall included $50 million directly related to the government shutdown, which occurred during the last month of the quarter and thus helped exacerbate an already uneasy market.

Regional Overview

BMO analysts point out from a revenue perspective, America’s revenue was down 0.5% sequentially and up 4.2% year-on-year, while EMEA sales were down 6.7% quarter-on-quarter and up 3.2% year-on-year and APJC sales declined 4.3% and 8.7% on a quarter-on-quarter and year-on-year basis, respectively. Orders declined in all regions with a 2% year-on-year decline in the Americas and 4% and 10% decline in EMEA and APJC respectively.

Terming Cisco Systems, Inc. (NASDAQ:CSCO)’s sales forecast as a horrible guide, Tim Long, Ari Klein and Alex Spektor of BMO Capital Markets lowered their price target to $25 from $29 which translates to 12x their CY14 EPS estimate of $2.05. However, as the analysts still find value in Cisco, they maintained an Outperform rating on Cisco.