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Cisco revenue forecast disappoints; says to cut 1100 more jobs

18 May 2017
Cisco revenue forecast disappoints; says to cut 1100 more jobs

Cisco shares were down $2.60 (7.69%) to $31.22 each in after-hours trading Wednesday.

Cisco, which announced in August that it would slash 5,500 jobs, said the new cuts would result in US$150mil (RM649mil) in additional pretax charges. The world's largest networking gear maker said that it expected revenue for its fourth quarter to fall by as much as 6 per cent compared to the same time a year ago, a drop of around $600 million.

Adding to the company's woes, Kelly Kramer, Cisco's chief financial officer spoke with Market Watch in a telephone interview pointing out that Cisco's large business dealings with the federal government, while maybe worth about 1.0 percent of the 4 to 6 percent sales decline projected for the fourth quarter, were still "dramatic".

Robbins wasn't so blunt as to put it that way, of course: he complained of a "lack of budget visibility" contributed about one per cent of the decline forecast for Q4.

For its fiscal third quarter 2017, Cisco reported revenue of $11.9 billion, a decrease of 1 percent year-over-year.

On a more positive note, revenue in Cisco's security business, which offers firewall protection and breach detection systems, is on the rise.

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.

Cisco posted adjusted earnings of 60 cents per share, excluding items, on revenue of $11.94 billion.

The company's net income rose to US$2.52bil (RM10.9bil), or US$0.50 per share, in the third quarter ended April 29 from US$2.35bil (RM10.17bil), or US$0.46 per share, a year earlier.

But the projection of revenue declines for the next quarter dominated questions from analysts on the earnings call.

Shares of Cisco fell 5.4 percent to $32 apiece late on Wednesday, after the firm announced the layoff plans.

Hence the extra job cuts, even though the company has shaved more than three per cent off its operating expenses year-on-year.

Analysts polled by Thomson Reuters were looking for an adjusted 58 cents a share on $11.89 billion in revenue.