Cisco Systems Inc, the largest maker of networking equipment, plans to cut thousands of jobs after a slowdown in corporate technology spending wiped out its sales growth.
A restructuring plan would affect about 5 percent of Cisco’s workforce, the company said on Wednesday.
It had almost 85,000 employees as of last year, suggesting that the move would involve approximately 4,000 jobs. The restructuring is to cost about US$500 million, Cisco said.
Photo: AP
The announcement accompanied a forecast that fell far short of what Wall Street was projecting, sending Cisco shares tumbling in late trading.
Customers are worried about the state of the economy, prompting them to delay orders and rethink how much equipment they need, Cisco chief executive officer Chuck Robbins told analysts on a conference call.
“Customers are pushing things out and putting a bit more scrutiny on them,” he said.
Cisco joins many of the largest technology companies in scaling back. Nearly 35,000 job cuts have been announced this year, according to Layoffs.fyi, which has been tracking technology layoffs since the COVID-19 pandemic.
Sales would be US$12.1 billion to US$12.3 billion in the fiscal third quarter, which ends in April. That compares with an average analyst estimate of US$13.1 billion. Excluding certain items, profit would be US$0.84 to US$0.86 per share, versus a prediction of US$0.92.
For this financial year, the company is now predicting a range of US$51.5 billion to US$52.5 billion. Earnings per share would be US$3.68 to US$3.74, excluding some items. Both of those targets are below what Wall Street is projecting.
Cisco’s adjusted gross margin — the percentage of sales remaining after deducting the cost of production — is expected to be 66 percent to 67 percent this quarter.
In Cisco’s fiscal second quarter, which ended on Jan. 27, revenue fell 6 percent to US$12.8 billion. That was the company’s first contraction in three years. Profit was US$0.87 per share, minus some items.
Analysts had estimated revenue of US$12.7 billion and earnings per shares of US$0.92.
Orders declined 12 percent in the fiscal second quarter and there would not be a quick recovery in the second half as the company had previously hoped, Robbins said.
The company had said that it has been hit by a temporary “pause” in orders from customers, who are busy installing equipment they have already acquired. While that supply logjam should resolve itself in the second half of this year, weak spending by telecoms would likely persist longer than previously projected, Cisco said.
Robbins is trying to reduce Cisco’s sales volatility by offering more networking services — particularly analytics and security features delivered over the Internet.
Adding to that effort, Cisco is acquiring data-crunching software maker Splunk Inc for US$28 billion, a deal announced in September last year.
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