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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: GVTucker who wrote (51459)	4/16/2001 4:12:44 PM
From: GVTucker	Read Replies (2) \| Respond to of 77399

Check that. CSCO won't be profitable. "Pro forma" earnings will be positive, but they're also taking restructuring charges and will write off $2.5 billion of inventory. They'll lose a ton of money in the quarter--probably more money than they made in all of fiscal 2000. Oh my.

To: GVTucker who wrote (51459)	4/16/2001 4:23:33 PM
From: MHA	Respond to of 77399

Cisco Systems Offers Business and Financial Update SAN JOSE, Calif.--(BUSINESS WIRE)--April 16, 2001--Cisco Systems, the worldwide leader in networking for the Internet, today provided a business and financial update and summarized recent actions it has taken to address current business conditions. Due to continued global economic challenges, the slowdown in the global telecom market, and the deceleration in corporate IT spending, Cisco expects revenue for its fiscal third quarter to be down approximately 30 percent sequentially from fiscal second quarter, which was $6.7 billion. The Company expects to be profitable for the third quarter, with pro-forma earnings per share expected to be in the very low, single-digit range. As global economies and capital spending inevitably turn around, the Company's long-term expectations for its segment of the IT industry remain at 30 to 50 percent growth per year. ``The business environment that our segment of the IT industry is facing has never been more challenging,'' said John Chambers, president and CEO. ``In fact, 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. During this time we have not changed our long-term vision and business strategy for the next three to five years, realizing there will be periods of growth in our industry segment both above and below expected levels. ``Personally, of all the difficult decisions we've had to make, the toughest was the reductions in headcount,'' said Chambers. Cisco expects to take a restructuring charge of approximately $800 million to $1.2 billion during the fiscal third quarter, associated with the restructuring of certain areas of Cisco's business. This charge comprises the following three components: Workforce reduction charge--Cisco is reducing its workforce by approximately 8500 people, which includes 2500 temporary and contract workers. Cisco expects to take a one-time charge of approximately $300 to 400 million this quarter related to this reduction in workforce. When the reduction in headcount is fully implemented, Cisco believes these actions will reduce its overall cost structure by approximately $1 billion on an annualized basis. Initial savings will begin during the fiscal fourth quarter of 2001. Consolidation of excess facilities and related fixed assets charge--Due to the workforce reduction and restructuring of certain businesses, Cisco expects to consolidate its workforce into designated facilities, resulting in an excess facilities charge of approximately $300 to $500 million. Asset impairment charge--The restructuring of certain businesses will also result in a charge relating to the impairment of assets, primarily goodwill, of approximately $200 to $300 million. Cisco also expects to take an additional excess inventory charge of approximately $2.5 billion during its fiscal third quarter. ``Business demand consistently exceeded our expectations throughout most of calendar year 2000,'' said Larry Carter, chief financial officer. ``And in an effort to meet our customer expectations we continued to increase our inventory and capacities to keep up with rising demand. This charge reflects the recent significant and unexpected drop in customer demand.'' Cisco's inventory balance, at the end of the third quarter of fiscal year 2001, is expected to be approximately $1.6 billion after this charge. The Company believes that inventory turns will increase, eventually moving back to its stated goal of seven to eight by the beginning of the next calendar year, assuming the economic challenges are reasonably resolved. Excluding the charge, Cisco expects its fiscal third quarter pro forma gross margin will be in the low to mid 50 percent range. The near-term decline in pro forma gross margin relates to continued overhead costs combined with lower shipment volumes. Cisco continues to see capital spending and macro-economic challenges expanding into other regions of the world. The United States continues to be challenging, especially in the enterprise and service provider areas of business. In Asia Pacific, Cisco is seeing weakness in Korea, Taiwan, Australia, and Japan. In Europe, Cisco is also experiencing weakness, primarily in the service provider market and in segments of the enterprise business. The Company currently expects its fiscal fourth quarter revenue will range from flat to down 10 percent sequentially. Cisco stated that visibility going forward is more difficult in the current business climate and is subject to more variability than normal. ``As we saw the business conditions evolving, we took the appropriate steps to implement and communicate what we believe to be very thoughtful modifications in the short run, while aligned to our long-term strategy,'' said Chambers. ``We remain very confident in our long-term growth opportunities and believe our breakaway strategy positions Cisco to continue to lead our industry.'' Cisco plans to report its fiscal year 2001 third quarter results on May 8, 2001 at 1:45 p.m. Pacific Time.