Cisco to cut 4,000 positions after missing forecast estimates

Bloomberg NewsAugust 14, 2013 

— Cisco Systems, the biggest maker of networking equipment, said it’s cutting about 5 percent of its workforce after issuing a fiscal first-quarter sales forecast that missed most analysts’ estimates.

Cisco is eliminating 4,000 jobs as weaker sales in Japan, China and Europe weigh on revenue growth, Chief Executive Officer John Chambers said on a conference call Wednesday. Revenue for the current quarter through October will be $12.2 billion to $12.5 billion, the San Jose, California-based company said in a statement. Analysts on average were projecting sales of $12.5 billion for the current period.

Chambers is grappling with concerns that Cisco’s growth rate may slow as companies and network operators postpone costly overhauls of their networks. Investors were predicting a strong quarter from Cisco because spending by U.S. corporations has been improving, according to Jayson Noland, an analyst at Robert W. Baird & Co. in San Francisco.

“They’re going to get crushed,” said Noland, who has an outperform rating on the stock, the equivalent of a buy. “If there’s something wrong somewhere in Cisco, given how well things have been going, investors would expect Cisco to make up the difference somewhere else.”

Cisco fell as much as 11 percent in extended trading. The shares advanced less than 1 percent to $26.38 the close in New York, leaving them up 34 percent this year.

While Cisco is benefiting from growing use of Web video and mobile devices that strain data networks and require the purchase of more routers, switches and servers, that hasn’t been enough to make up for weaker sales outside the U.S. Slower world economic growth impacts Cisco because of its global footprint. The company gets more than half its sales from the U.S. and Canada, a quarter from Europe and a sixth from Asia, according to data compiled by Bloomberg.

Cisco’s campus in Research Triangle Park houses more than 5,000 employees and contractors.

Profit excluding some items was 52 cents a share in fiscal fourth quarter, while revenue rose 6 percent to $12.4 billion. Analysts on average had projected profit of 51 cents and sales of $12.4 billion, according to data compiled by Bloomberg.

With the new cuts, Cisco will have eliminated 12,300 jobs over the past two years as it has exited consumer businesses while expanding on corporate software and technology services, including cuts of 500 jobs announced in March.

Net income rose 18 percent to $2.27 billion, or 42 cents a share, from $1.92 billion, or 36 cents, a year earlier.

The company’s shares have rallied 46 percent since January 2012 with the introduction of new products and an aggressive strategy, taking business from rivals, including Juniper Networks, the No. 2 maker of computer-networking equipment, according to Simon Leopold, an analyst at Raymond James & Associates in New York.

News & Observer is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service