Shares fell sharply on Thursday after the company released weak sales forecasts, suggesting that companies are cutting back on spending at a time when the pandemic has triggered a recession.
chuck Robbins, Cisco’s chief executive, has promised to reduce spending by $1 billion through restructuring, including layoffs and early retirement of some employees. In a regulatory filing, the company said the plan would cost about $900 million, including severance payments and other “termination benefits.”. Kelly Kramer, chief financial officer, will also leave.
the San Jose, California based company said in a statement on Wednesday that revenue would fall 9% to 11% year-on-year in the first quarter ending at the end of October. Analysts had previously expected an average decline of about 7%. Adjusted earnings per share will be 69 cents to 71 cents, while data compiled by Bloomberg show that Wall Street’s expectation is 76 cents.
analysts are generally disappointed with Cisco’s expectations. Cowen wrote that the company’s performance and outlook were “at best not encouraging, but at worst worrying.” However, the long-term outlook is more positive. Several institutions said dividends and valuation factors would limit downside risk, and evercore ISI said 2021 was “likely to be much better.”.