Cisco late this afternoon released its second quarter results, as well as announcing a reduction of its payroll by five per cent, which in terms of head count means an estimated 4,250 employees will be receiving termination notices.
According to a Reuters report, the company “lowered its annual revenue target as (it) navigates a tough economy that has led to thousands of layoffs by tech firms this year. Shares of the networking equipment maker fell more than five per cent in extended trading on Wednesday after Cisco cut the forecast to US$51.5 billion to US$52.5 billion, from US$53.8 billion to US$55 billion that it projected earlier.”
The company, according to the report, “will incur a charge of US$800 million on the layoffs, before tax, consisting of severance and other costs.”
A release issued by Cisco this afternoon stated that the company reported second quarter revenue of US$12.8 billion, net income on a generally accepted accounting principles (GAAP) basis of US$2.6 billion or US$0.65 per share, and non-GAAP net income of US$3.5 billion or US$0.87 a share.
During an earnings call, company chair and chief executive officer (CEO) Chuck Robbins said that there were three factors impacting what he described as the “demand environment,” which ultimately led to the decision to reduce staff.
“First, in terms of the macro environment, we’re seeing a greater degree of caution and scrutiny of deals given the high level of uncertainty,” he said. “As we’re hearing this from our customers, it’s leading us to be more cautious with our forecast and expectations.
“Second, as we discussed last quarter, and subsequently saw in other technology provider results, customers have been taking time since the start of our fiscal 2024 to deploy the elevated levels of products shipped to them in recent quarters, and this has taken longer than our initial expectations.
“Third, we also continue to see weak demand with our telco and cable service provider customers. This industry has seen significant pressure, and they are adjusting deployment phasing, which is weighing on our business outlook. Given these factors, we’re adjusting our expenses and investments to reflect the current environment.”