Cisco to Cut 1,100 Jobs as Earnings Disappoint

Cisco to Cut 1,100 Jobs as Earnings Disappoint

Cisco Systems Inc forecast current-quarter revenue that widely missed analysts' estimates and said it would cut 1,100 more jobs, as the world's largest networking gear maker steps up efforts to transform into a software-focused company.

Shares of the Dow component fell 8.2 percent to $31.05 in after-market trading on Wednesday. The stock had closed down 1.4 percent in regular trading, compared with the 1.78 percent slump in the index.

Cisco, which announced in August that it would slash 5,500 jobs, said the new cuts would result in $150 million (roughly Rs. 966 crores) in additional pretax charges.

The company said on Wednesday it expected revenue for its fourth quarter to fall between 4-6 percent from a year earlier, implying a range of $11.88 billion - $12.13 billion (roughly Rs. 76,493 crores - Rs. 78,098 crores).

Analysts on average had expected revenue of $12.51 billion (roughly Rs. 80,545 crores), according to Thomson Reuters I/B/E/S.

Cisco said orders in its public sector business, which includes sales to federal, state and local governments, fell 4 percent in the third quarter ended April 29.

"It's a pretty significant stall right now with the lack of budget visibility," Chief Executive Chuck Robbins said on an earnings call.

Democrats and Republicans agreed earlier this month to provide around $1 trillion (roughly Rs. 64,39,846 crores) to keep the federal government funded through the end of the fiscal year on September 30.

However, divisions between the parties are likely to flare up again when the White House unveils President Donald Trump's first full budget for the 2018 fiscal year on Tuesday.

"So, you've got some pretty large pieces of (the) business under duress," Needham & Co analyst Alex Henderson said.

"Some of it is probably around the lack of a budget agreement on extending the debt limits until fairly late in the quarter, some of it could be related to timing of programs - it's hard to pin that down."

Demand for Cisco's routers remained weak in the latest quarter, contributing to the company's sixth straight decline in revenue.

Revenue in its closely-watched security business, which offers firewall protection and breach detection systems, rose 9 percent to $527 million (roughly Rs. 3,393 crores), but missed analysts' estimate of $545.5 million (roughly Rs. 3,511 crores), according to financial data and analytics firm FactSet Street Account.

The security business is set to benefit from a likely jump in spending by companies and governments following the recent global "ransomware" attack, according to some analysts.

Cisco, like other legacy technology players, is shifting its focus to high-growth areas such as security, the Internet of Things and cloud computing, amid intense competition from companies such as Huawei and Juniper Networks Inc .

The company said it expected an adjusted profit of 60 cents-62 cents per share for the current quarter. Analysts on average were expecting a profit of 62 cents.

The company's net income rose to $2.52 billion (roughly Rs. 16,222 crores), or 50 cents per share, in the third quarter ended April 29 from $2.35 billion (roughly Rs. 15,127 crores), or 46 cents per share, a year earlier.

Excluding items, the company earned 60 cents per share. Revenue fell 0.5 percent to $11.94 billion (roughly Rs. 76,858 crores).

Analysts on average had expected adjusted earnings of 58 cents per share and revenue of $11.89 billion (roughly Rs. 76,538 crores).

© Thomson Reuters 2017


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