Cisco Systems Inc gave a lackluster sales forecast for the current period, a sign that businesses are spending less in the pandemic-driven recession.
Chief executive officer Chuck Robbins pledged to reduce expenses by US$1 billion through a reorganization that would include job cuts and early retirement for some workers.
The plan would cost about US$900 million, which would include severance and other “termination benefits,” the company said in a regulatory filing.
Revenue is to fall 9 to 11 percent from a year earlier in the fiscal first quarter, which ends in late October, the San Jose, California-based company said in a statement on Wednesday.
Analysts on average had projected a decline of about 7 percent.
Adjusted profit is to be US$0.69 to US$0.71 a share, lower than Wall Street expectations of US$0.76, Bloomberg data showed.
Cisco shares on Wednesday fell 6.5 percent in extended trading, after closing earlier at US$48.10 in New York trading.
A large chunk of Cisco’s revenue comes from government agencies, small and medium-sized businesses, and providers of Internet and online video services. While some larger companies are still spending, many smaller customers have cut spending to adjust to an economic slowdown sparked by COVID-19 lockdowns.
In Cisco’s Americas region, where sales dropped 12 percent, demand has not improved in the past 90 days and the US needs the US Congress to provide another stimulus package, Robbins said.
“As you move down the customer stack, things just get weaker and weaker as the customers get smaller and smaller, because they just don’t have the financial wherewithal,” he said.
After returning to growth in 2018, revenue has started to decline again this year, showing how Cisco’s business is still exposed to economic cycles.
Cisco reported that net income in the fiscal fourth-quarter rose to US$2.6 billion, or earnings per share of US$0.62, from US$2.2 billion, or US$0.51, a year earlier, while revenue fell to US$12.2 billion.
Excluding certain items, Cisco posted profit of US$0.80 a share, whereas analysts were looking for profit of US$0.74 on revenue of US$12.1 billion.
Infrastructure platforms, its hardware business and main source of revenue, suffered a 16 percent sales drop to US$6.6 billion. Cisco’s software business saw revenue fall 9 percent, while security-related sales increased 10 percent.
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