What was that about the valuation of "tronics stocks" and the new pair-a-dime
Hmmmmmmm.........
Railroads, radio, TV, Uranium and now....
the venerable new economy internet bla, bla, bla infrastructure.
CSCO's currency is going to have a tough time(as a currency for acquisition).
As we saw with the Mir, the re-entry can be spectacular.
;?)mad2
Where are the bulls?
Really nothing new here, just confirmation of what's been building over the past 7 months.
April 17, 2001
--------------------------------------------------------------------------------
Cisco Revenue, Sales to Fall Well Short
Of Estimates Amid Business Slowdown
Networking-Equipment Giant Sets Plans
To Lay Off 8,500 Workers, Take Big Charge
By LEE GOMES
Staff Reporter of THE WALL STREET JOURNAL
Cisco Systems Inc. confirmed Wall Street's fears by warning that its fiscal third-quarter sales and profit will be sharply lower as a result of the slowdown in technology spending.
The network-gear maker also set a significantly higher write-off of its inventory, more job cuts and a slew of one-time charges. It also gave a downbeat assessment of revenue growth for its fiscal fourth quarter.
Cisco announced the news after the close of regular trading. As of 4 p.m. Monday in Nasdaq Stock Market trading, Cisco fell 78 cents to $17.20. In after-market trading, the shares slipped an additional 7.7% to $15.87.
Data-Network-Equipment Makers Face Tough 1st-Quarter Results (April 11)
Cisco CEO Says Pace of Orders Hasn't Accelerated in Quarter (March 13)
Cisco to Trim up to 17% of Work Force, Its First Widespread Layoffs in 17 Years (March 12)
For the period ending April 30, the San Jose, Calif., company predicted earnings per share in "the very low, single-digit range," as well as sales of around $4.75 billion.
That revenue is 30% lower than that of the second quarter and slightly below the figure from last year, when the company had revenue of $4.92 billion and net income of $662 million, or nine cents a diluted share.
To adjust its costs to its sales slowdown, Cisco said it will reduce its work force by 8,500 people, about 500 more than the maximum it projected last month. The cuts will affect about 6,000 of its 44,000 permanent employees and 2,500 temporary and contract workers; it had estimated March 9 that it would cut 3,000 to 5,000 permanent positions, and 2,500 to 3,000 temporary and contract workers.
Cisco also announced it would write off $2.5 billion in inventory, reflecting a sudden excess of microchips and other components used in its hardware.
With its formal announcement, Cisco joins a long roster of former bull-market stars to warn investors that the Internet bubble days are over. But the company's warning was only slightly worse than Wall Street had been expecting, since most analysts had cut their numbers for Cisco in recent weeks as the spending slowdown that has stalked tech companies continued to show no sign of letting up.
Early last year, Cisco's shares were trading near $80. At the time, it was posting quarter after quarter of remarkable, and apparently unstoppable, sales increases. Indeed, last year, Wall Street was expecting the company to earn around 25 cents a share for the third quarter. The company expects to report its third-quarter earnings on May 8.
Monday, though, the company not only gave its downbeat perspective on the current quarter, but added that sales for the fiscal fourth quarter will be flat with -- or even as much as 10% below -- the sales for the current period. Analysts said Cisco was being hit in all three major segments of its business.
Corporate technology buyers, who use Cisco's high-end gear, have stopped making purchases on account of economic uncertainties, something that also has affected the company's small business lines.
And purchases also are off at Internet service providers and telephone carriers, which had been a mainstay of Cisco's long-term growth plans.
Those companies, said Cristin Armacost, of SG Cowen Securities Corp., are now suffering from "bandwidth indigestion" after making excessive purchases of networking capacity in the last several years. "There had been a spending frenzy, but that has stopped," she said.
Despite its current difficulties, Cisco's management predicted that once national and international economies recover, it expects to again post growth rates of between 30% and 50%.
Not all analysts, though, had the same expectations. Christopher Stix, with Morgan Stanley, predicted that Cisco may be facing a long-term future in which its annual growth is closer to 20%.
--------------------------------------------------------------------------------
Highlights of Cisco's New Warning
Expects fiscal third-quarter revenue to be down about 30% from second quarter's revenue of $6.7 billion
Plans to take an excess-inventory charge ofapproximately $2.5 billion during third-quarter.
Will reduce its workforce by about 8,500 people.Expects to take a one-time charge of $300-$400 million.
Plans to consolidate facilities, resulting in a charge of approximately $300-$500 million
Sets charge to write-down assets, mostly goodwill,of about $200-$300 million.
Says fiscal fourth-quarter revenue will range from flatto down 10% sequentially.
Source: Thomson Financial/Baseline
--------------------------------------------------------------------------------
The company announced separate charges of between $800 million and $1.2 billion, which will cover the layoffs and other restructuring items, including the closing of certain business lines.
"This may be the fastest any industry our size has ever decelerated, which has required us to make difficult business decisions at an unprecedented speed," said John Chamber, Cisco's chief executive.
Cisco also said Monday that it would be issuing new stock options to its remaining employees, many of whom have options that are worthless owing to the drop in the company's share price.
Cisco, like many other technology companies, had become accustomed in recent years to using options to recruit new employees as well as provide incentives to current workers.
Write to Lee Gomes at lee.gomes@wsj.com
|
