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Friday March 9, 4:21 pm Eastern Time
Cisco says to cut jobs, sees risks, slowdown deepening
(UPDATE: Adds background, details, analyst comment, byline, changes slugline, pvs San Jose)
By Eric Lai and Duncan Martell
SAN FRANCISCO, March 9 (Reuters) - Cisco Systems Inc.
(NasdaqNM:CSCO - news), the leading maker of networking equipment for the Internet, said on Friday it would cut its full-time workforce by as much as 11 percent over the rest of the fiscal year because of signs the economic slowdown is spreading and could run longer than anticipated.
In a statement, Cisco said it would cut between 3,000 to 5,000 regular jobs, a number equivalent to between 7-11 percent of its global employee base of 44,000. The disclosure by Cisco follows a Reuters report late Thursday night that the San Jose, Calif.-based company would be making cuts.
As a result, the company said it would take a one-time charge of between $300 million and $400 million by the end of the fourth quarter 2001.
After hitting a low of $20-5/16 before the announcement, Cisco closed down $$2-3/16 at $20-5/8 on Nasdaq on volume of more than 149 million shares, more than triple its average daily activity. Its shares were at $20-1/2 in after-hours trading on Instinet.
``We're taking these steps because of the continuing slowdown in the U.S. economy and initial signs of a slowdown expanding to other parts of the world. We also now believe that this slowdown in capital spending could extend beyond two quarters,'' Cisco President and Chief Executive John Chambers said in the statement.
Cisco also said it would lay off most of its contract workers, cutting from 2,500 to 3,000 jobs from a current base of about 4,000 temporary workers.
In the statement, Cisco did not comment on how much money it hopes to save from the layoffs and budget cuts, which include cutting travel costs by 60 percent.
Gerard Klauer Mattison analyst Michael Cristinziano told Reuters before the Cisco announcement that he thought large-scale layoffs were unnecessary.
``To cut people would be counter-productive and doesn't do any good for morale,'' he said.
Like many high-tech companies during the extended Nasdaq bull run, Cisco had been on an growth spurt, adding around 23,000 employees over the last year and a half.
Now, along with other makers of telecommunication and networking equipment, Cisco is being hurt as phone companies and big corporations slash their capital expenditure and technology budgets.
Larry Carter, the chief financial officer, said in the statement that, as a result of the economic uncertainty unfolding around the globe, the range of analyst estimates for per-share earnings would be wider.
``We do expect a wider range of estimates for the remainder of this fiscal year,'' Carter said.
For years, Cisco's careful management has resulted in analysts' estimate ranges that were in a tight band, often ranging little more than a few pennies apart. |
