Cisco Systems Inc. announced a restructuring plan on Wednesday that includes job cuts of 5%, or about 4,200 people, on lower quarterly and fiscal-year guidance.
“Given the cautious macro environment, we’re seeing uncertainty on deals and are more cautious in our forecast and expectations” in the coming months, Cisco Chief Executive Chuck Robbins said in a conference call with analysts following the results. “We remain confident in our long-term strategy.”
Cisco Chief Financial Officer Scott Herren said the workforce reduction will result in charges of about $800 million. He deemed the current economic climate as uncertain amid a volatile market, the conflict in the Middle East and the recent CPI report.
Cisco
CSCO,
reported fiscal second-quarter net income of $2.6 billion, or 65 cents a share, on revenue of $12.8 billion, down from $13.6 billion a year ago. After adjusting for stock-based compensation and other costs, Cisco reported earnings of 87 cents a share, down from 88 cents a share in the same quarter a year ago.
Analysts surveyed by FactSet on average expected adjusted net income of 84 cents a share on revenue of $12.71 billion. Shares skidded more than 5% in the extended session. Cisco’s stock closed up 1.3% in regular trading Wednesday at $50.28.
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Cisco’s Product business ($9.2 billion) was down year over year, while Service ($3.6 billion) sales were up slightly. Analysts on average expected total product revenue of $9.3 billion, according to FactSet.
AI-related enterprise sales have emerged over the past 90 days, Robbins added, with movement in financial services.
For the current fiscal third quarter, Cisco executives guided for adjusted earnings of 84 cents to 86 cents a share in adjusted profit and revenue of between $12.1 billion and $12.3 billion. Analysts were forecasting adjusted earnings of 92 cents a share and revenue of $13.1 billion, according to FactSet.
For the fiscal year, Cisco guided for revenue of $51.5 billion to $52.5 billion and adjusted earnings of $3.68 to $3.74 a share. Analysts polled by FactSet are modeling for $3.86 and $54.4 billion, respectively.
Cisco executives are notoriously conservative in full-year projections and could raise quarterly estimates, however. Robbins also said Cisco expects to close its $28 billion acquisition of Splunk Inc.
SPLK,
by the end of the quarter instead of the end of the fiscal year.
Shares of Cisco have crept up 3.8% over the past year, while the broader S&P 500 index
SPX
has gained 20.6%.