Cisco Plans More Than 4,000 Job Cuts Amid Outlook Warning, Stock Dips

(RTTNews) - Networking equipment maker Cisco Systems Inc. announced its plans to cut 5 percent of its global workforce, which comes to more than 4,000 jobs, as part of its ongoing restructuring efforts. The news comes as the company trimmed its earnings and revenue outlook for fiscal 2024 citing weak demand and a tough economy.

Following the announcement at the second-quarter earnings call on Wednesday, Cisco shares declined more than 5 percent in the extended trading.

Thursday, in pre-market activity on Nasdaq, the shares are down around 4 percent to trade at $48.29.

Cisco Systems had 84,900 employees as of July 29, 2023.

The company said it is realigning its investments and expenses to reflect the current environment.

Reuters reported earlier that the company previously hinted about layoffs and restructuring to focus on high-growth areas.

During the conference call with analysts, CEO Charles Robbins said, "...in terms of the macro environment, we are seeing a greater degree of caution and scrutiny of deals given the high level of uncertainty. As we're hearing this from our customers, it's leading us to be more cautious with our forecast and expectations... 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 is taking longer than our initial expectations."

The company continues to see weak demand from telco and cable service provider customers.

The company sees pre-tax charges of approximately $800 million related to its restructuring plan.

Cisco expects to take the majority of these restructuring actions in the third quarter of fiscal 2024 and recognize around $500 million of these charges, while around $150 million charges will be recognized in the fourth quarter, and the remaining primarily through the first half of fiscal 2025.

For the third quarter, the company expects adjusted earnings per share in a range from $0.84 to $0.86 and revenue in the range of $12.1 billion to $12.3 billion.

Analysts on average expect the company to report earnings of $0.92 per share on revenues of $13.09 billion, according to figures compiled by Thomson Reuters. Analysts' estimates typically exclude special items.

For fiscal 2024, the company now expects earnings per share in a range of $3.68 to $3.74 from the previous estimate of $3.87 to $3.93, and revenues in a range of $51.5 billion to $52.5 billion, down from the previous estimate of $53.8 billion to $55 billion.

Analysts expect the company to report earnings of $3.86 per share on revenues of $54.26 billion for the year.

According to the company, the expectations for the second half have been reset "to account for the caution around macro uncertainty, the continued absorption by our customers of record levels of product shipments they received from us, and the weakness of our service provider market."

In its recent second quarter, Cisco's earnings decreased from last year with weak revenues, but beat the Street estimates.