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Friday March 9, 7:05 pm Eastern Time
TheStandard.com
Downturn Snares Cisco
By Mark Boslet
Cisco Systems reined back Wall Street's profit expectations for its third and fourth quarters and announced layoffs of up to 5,000 full-time employees and 3,000 temporary workers.
The networking giant said the continued slowdown in the U.S. economy and early signs of slowing in economies elsewhere in the world were the reasons for trimmed financial outlook. "We also now believe that this slowdown in capital spending could extend beyond two quarters" and into the second half of the year, said a statement from chief executive John Chambers.
As corporations in America and elsewhere in the world increasingly adopt a more cautious approach to technology spending, companies such as Intel, Texas Instruments and Motorola have suffered. On Friday, Cisco became the latest, indicating once again that even the formerly hot market for Internet networking equipment has cooled.
In a press release, the company veiled its earnings warning in a vague outlook for the remainder of its fiscal year, which ends in July. "While Cisco is only five weeks into the third quarter and it is premature to quantify the impact of this current business climate, we do expect a wider range of estimates for the remainder of this fiscal year," according to a statement from CFO Larry Carter.
Analysts such as Kevin Slocum at Wit SoundView immediately saw the statement as an earnings warning. Corporate customers are spending money more carefully and "until the coast is clear, it's looking like its going to stay that way," Slocum said.
Cisco also said it will eliminate between 3,000 and 5,000 full-time jobs through attrition and layoffs and between 2,500 to 3,000 temporary and contract workers. The company employs 44,000 full-time workers – meaning that as much as 11 percent of its workforce could go - and 4,000 temps.
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