Cisco Systems Inc., a leading manufacturer of networking equipment, revealed plans to slash 5 percent of its global workforce – over 4,000 jobs. This is part of the company's continuous restructuring initiative as they prepare to navigate a challenging economic landscape and waning demand. Consequently, they have adjusted their revenue and earnings outlook for the fiscal year 2024 downwards.
Following the revelation during Wednesday's second-quarter earnings call, Cisco's shares fell dramatically, recording over a 5 percent drop in extended trading. Nasdaq pre-market activity on Thursday saw the shares further decrease by around 4 percent, bringing the trading price to $48.29.
Cisco Systems boasted a total of 84,900 employees as of July 29, 2023. The reduction aligns with the corporation's agenda to revamp its investments and expenditure to suit the current economic climate.
Earlier, a Reuters report revealed Cisco's intent wherein company hinted at possible staff layoffs and restructuring, aiming to shift focus towards sectors with high growth potential.
CEO Charles Robbins stated during an analysts conference call, "the present macro environment is encouraging a more cautious approach, resulting in careful scrutiny of deals due to rampant uncertainties. We've taken note of this caution from our clients, causing us to adopt a more conservative stance on our forecasts and prospects. We've observed that our customers delayed action since the onset of fiscal 2024 to utilize the surge of products we've delivered in the recent quarters. This pause has exceeded our initial timeline."
The company continues to experience tepid demand, especially from cable service and telecommunication providers. Cisco estimates its restructuring plan will incur pre-tax charges of about $800 million. They intend to conduct most of these restructuring processes in the third quarter of fiscal 2024, recognizing approximately $500 million of these charges; around $150 million more will follow in the fourth quarter with the rest appearing mainly in the first half of fiscal 2025.
For the third quarter, Cisco anticipates an adjusted earning per share between $0.84 and $0.86, and revenue between $12.1 billion and $12.3 billion.
In contrast, Thomson Reuters-compiled figures show that on average, analysts predict the company will report earnings of $0.92 per share and revenues amounting to $13.09 billion. Such estimates generally exclude extraordinary items.
For the fiscal year 2024, Cisco now anticipates earnings per share between $3.68 and $3.74, a decline from the original estimate of $3.87 to $3.93. They expect their revenues to range from $51.5 billion to $52.5 billion, down from the initial projection of $53.8 billion to $55 billion.
Analysts foresee reported earnings of $3.86 per share and a revenue of $54.26 billion for the current year.
According to Cisco, the outturn for the second half has been revised to accommodate caution surrounding macro uncertainty, the need for clients to utilize substantial product deliveries in the recent time, and the frailty in their service provider market.
In the recently concluded second quarter, Cisco reported a downturn in earnings from the previous year due to softening revenues, although they managed to outperform Street estimates.
