Apr, 2001 : Cisco to Miss Estimates, Plans Layoff of 8,500

📅 April 17, 2001 - Networking hardware manufacturer Cisco Systems Inc. said on Monday that its third-quarter pro forma earnings will miss analysts? expectations by a wide margin, and that the company will lay off a total of 8,500 workers, a confirmation of earlier estimates of work force reductions.
The company said that the current business environment has never been more challenging, and added that it expects sales to fall 30 per cent from the second to the third quarter. Cisco says that it sees third quarter pro forma per-share earnings in the very low single digit range.
This is Cisco's biggest ever earnings miss, and the first time the company's sales have declined on a sequential basis while the company has been public.
Analysts say that Cisco's announcement is a bad sign, not just for the networking giant, but more importantly, for the communications industry in general. Cisco says the weakness in demand has clearly spread into the Asia-Pacific region, and into Europe. The company has never seen business slow so quickly and significantly
According to analysts, if Cisco, one of the tech companies still doing relatively well, is suffering such serious revenue difficulties, the news should be troubling to the industry.
This is just the second time Cisco has missed earnings forecasts, the first being in the second quarter. Previously, the company had consistently exceeded analysts? predictions by exactly one cent.
Cisco's major competitors, including Lucent Technologies Inc. and Nortel Networks Corp. have all recently announced job cuts or issued profit and sales warnings.
Cisco says it also plans to take a restructuring charge of between $800 million and $1.2 billion associated with the layoffs, as well as a charge of about $2.5 billion for excess inventory.
The company says that it expects by cutting about 8,500 jobs, including about 2,500 temporary and contract workers, Cisco can save about $1 billion annually, and that the initial savings will materialize during the fiscal fourth quarter of 2001, ending in July.