Cisco Systems Inc., the biggest maker of machines that run computer networks and the internet, gave an upbeat quarterly revenue forecast, while also unveiling a plan to cut jobs and reduce office space to align with changing business conditions.
(Bloomberg) — Cisco Systems Inc., the biggest maker of machines that run computer networks and the internet, gave an upbeat quarterly revenue forecast, while also unveiling a plan to cut jobs and reduce office space to align with changing business conditions.
Sales in the quarter ending in January will jump 4.5% to 6.5%, Cisco said Wednesday in a statement. Analysts had predicted that revenue would expand about 4% from a year ago, when the company generated $12.7 billion in sales. For fiscal 2023, revenue will grow as much as 6.5%, an increase from the company’s previous outlook of as much as 6%.
Cisco said a restructuring plan beginning in the current quarter would involve job cuts to “rebalance the organization” and office closings to align better with employees working in a hybrid system from home and company locations. San Jose, California-based Cisco will incur pretax charges of about $600 million for severance, termination and other costs, about half of which will be recognized in the current quarter, according to a regulatory filing.
The restructuring plan will affect about 5% of the company’s employees, who will be given the opportunity to move to other positions at Cisco, Chief Financial Officer Scott Herren said in an interview.
“This is not about reducing our workforce — in fact we’ll have roughly the same number of employees at the end of this fiscal year as we had when we started,” Herren said. Cisco had more than 83,000 employees as of July 30.
Cisco joins technology companies including Meta Platform Inc., Amazon.com Inc. and Salesforce Inc. that have announced job cuts and hiring freezes in recent weeks amid an uncertain economic climate.
Cisco’s management has argued that upgrading networks to keep up with the pace of data generation is so important that corporations and government agencies were continuing to spend regardless of external circumstances. That optimism in the face of the broader economic downturn is being supporting by continuing strong orders and Cisco’s ability to meet customer demand via greater availability of components.
The shares rose about 4% in extended trading following the announcement. The stock had earlier closed at $44.39 in New York and has dropped 30% this year.
Under Chief Executive Officer Chuck Robbins, Cisco has been trying to fire up growth with hardware and software, as well as new products provided over the internet. Robbins is aiming to make the company a provider of services paid for on a recurring basis and less reliant on one-time sales of expensive machines.
Revenue in the three months that ended Oct. 29 gained 6% to $13.6 billion. Excluding some items, per-share profit was 86 cents. Analysts had projected sales of $13.3 billion and profit of 84 cents.
Highlighting the demand for Cisco’s gear, its hardware division — the largest contributor to total revenue –posted a sales increase of 12% in the fiscal first quarter from a year earlier. The security unit gained 9% while collaboration, Cisco’s conferencing-related division, declined 2%.
Recurring revenue from its new product offerings increased to more than $23 billion on a annualized basis, and greater availability of chips helped the company fill more orders, Herren said in the statement. That performance, along with the easing supply situation, “provides us with great visibility and predictability, and supports our increased full year guidance,” Herren added.
Profit, excluding some items, will be 84 cents to 86 cents a share in the current quarter. For the fiscal year, Cisco projected that measure at $3.51 to $3.58 a share. Both predictions are in line with estimates.
(Updates with restructuring costs in the third paragraph.)
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