Cisco warns of revenue slide, increases job cuts

Networking giant Cisco Systems Inc. Monday warned that revenue in its third fiscal quarter ending this month will be down about 5 percent from the same period a year ago and said it's increasing the number of workers being let go under a layoff plan first disclosed last month.

Cisco said about 8,500 employees will now be cut from its workforce, up from the figure of 8,000 that the San Jose-based company announced in early March. About 6,000 regular employees and 2,500 temporary and contract workers will lose their jobs, according to Cisco.

The company said it also plans to make other cutbacks, including the closing of some facilities and a restructuring of the assets at some business units. Altogether, the workforce reductions and the other cost-cutting actions are expected to result in a one-time charge ranging from US$800 million to $1.2 billion.

Third-quarter revenue is now expected to total about $4.7 billion, down from $4.92 billion in the same three-month period last year and off 30 per cent from the $6.7 billion in business that Cisco reported for its second quarter, ended Jan. 27. Pro forma earnings per share in the third quarter will likely be "in the very low, single-digit range" before the charge is accounted for, the company said.

"The business environment that our segment of the IT industry is facing has never been more challenging," said John Chambers, Cisco's president and CEO, in a statement. "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."

Demand from U.S. users remains weak, especially in the enterprise and service provider markets, Cisco said. The company added that capital spending cutbacks and other "macroeconomic challenges" are also now expanding into other regions, leading it to predict that fourth-quarter revenue will be flat with third-quarter levels at best.

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