Cisco Profits Down By 27 Percent, Outlook Is Poor

Cisco Systems Inc.’s chief exec John Chambers projects that its revenues for the current quarter will decline more sharply than what has been predicted by Wall Street, and asserted that the company is looking forward to axe up to 2,000 jobs.

Owing to the ongoing downturn in global economy, Chambers told analysts that he predicts the revenue for the third quarter of the fiscal to plunge by 15 to 20 percent as compared to the figures a year ago, and the fall is much sharper than the Wall Street’s predictions of 10.5 percent decline to $8.8 billion.

There would be no company wide layoffs on the cards, he said, as a lay off in the company, according to Chambers, would at least involve 10 percent of its workforce, which means around 6,700 of its total staff of 67,000 employees.

The forecast eventually made Cisco’s shares to plummet by 4 percent as its investors assumed that the world’s largest network equipments maker may be dealing with the turn down in technology spending.

Meanwhile, the company announced financial results for the second quarter that ended on 24 January, and the company posted 27 percent fall in its net income, which has somehow managed to beat analysts’ predictions, with its profits for the quarter sit around 1.5 billion as against $2.06 billion, a year back.

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Our Comments

Cisco, like many other network manufacturers, will be hard hit by the recession just like in last century's dotcom bubble burst. Canadian manufacturer Nortel has already been placed in administration but Cisco might be planning a bold strategic move by launching its own customised servers. This, though, might alienate several of its partners (like HP) and cause more harm than good.

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