Cisco scrapes past 3Q estimates - News

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This story was printed from ZDNet Australia.
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Cisco scrapes past 3Q estimates

By Ben Heskett and Sam Ames, Special to ZDNet
May 09, 2001
URL: http://www.zdnet.com.au/news/soa/Cisco-scrapes-past-3Q-estimates/0,139023165,120220625,00.htm

Cisco Systems has reported sharply reduced third-quarter earnings that fell 77 percent, beating revised analyst expectations after the company warned of slowing sales in April.

Cisco Chief Executive John Chambers attributed the company's revised earnings to the current troubles in the telecommunications and high-technology industries.

"The peaks in the new economy will be much higher and the valleys much lower and the movement between to the two much faster," Chambers said during a conference call with financial analysts.

The economic downturn has left few telecommunications companies, let alone general technology companies, standing tall in its wake. Cisco competitors Nortel Networks, Lucent Technologies and Extreme Networks, among several others, have all had their share of earnings warnings and layoffs.

Chambers said the company should emerge from the current conditions with a clearer vision of what's expected to survive.

"We underestimated how quickly the valley could occur and the depths of that valley," Chambers said. "So you will see us respond to the troughs more effectively."

Excluding charges, Cisco lost US$2.69 billion compared with a net income of US$641 million a year ago. Those figures include the US$109 million in charges related to the acquisitions of Active Voice, Radiata and ExiO Communications as well as charges totaling US$3.37 billion for restructuring, inventory write-offs, and other items.

Layoffs loom
The leading networking equipment maker warned of slow sales and layoffs in April. It now finds itself in the midst of the worst decline in its fortunes as a public company.

Chambers discussed the layoffs during the conference call, saying that the reductions were the most painful part of the company's restructuring process. He said that wild stock price fluctuations and strong criticism are part the rapidly changing high-tech world, but that "letting go of people for doing their job is the worst thing a leader can do."

During the quarter, the company cut 3,401 employees to reach a total head count of 39,660. About 6,000 of the planned cuts are temporary or contract workers.