(Bloomberg) – Cisco Systems Inc. gave a sluggish sales forecast for the current period, a sign that companies and government agencies are spending less in the pandemic-driven recession.
Chief Executive Officer Chuck Robbins promised to reduce spending by $ 1 billion through a reorganization that will include cuts and early retirement for some workers. The plan will cost about $ 900 million, which will include divorce and other ‘termination benefits’, “the company said in a statement submitted. Chief Financial Officer Kelly Kramer is also leaving. Revenue will fall from 9% to 11% from a year earlier in the fiscal first quarter, which ends in late October, the company in San Jose, California, said in a statement Wednesday, analysts had projected a decline of about 7% on average.Adjusted profit will be 69 cents to 71 cents a share be, lower than Wall Street expectations of 76 cents, according to data compiled by Bloomberg.
Cisco shares fell nearly 7% in extended trading. The stock closed earlier at $ 48.10 in New York.
A large portion of Cisco’s revenue comes from government agencies, small and medium-sized businesses, and Internet and online video game providers. Many of these customers have cut spending to accommodate an economic slowdown triggered by Covid-19 lockdowns.
The results “reflect the ongoing challenges in today’s environment,” Cisco said. “Some customers continue to delay purchasing decisions until they have more clarity.”
Robbins seeks to reduce Cisco’s reliance on expensive proprietary hardware and increase sales of software and services. After returning to growth in 2018, revenues began to decline again this year, showing how Cisco’s business is still exposed to economic cycles.
Cisco said net income in the fiscal quarter to $ 2.6 billion, or 62 cents a share, went from $ 2.2 billion, up 51 cents, a year earlier. Revenue fell to $ 12.2 billion. With the exception of certain items, Cisco posted earnings of 80 cents per share. Analysts were looking for gains of 74 cents on revenue of $ 12.1 billion.
Infrastructure platforms, their hardware business and the main source of revenue, suffered a 16% sales loss to $ 6.6 billion. Applications, the software company, saw revenue fall 9%, while security-related sales increased 10%.
(Updates with reorganization plan in second paragraph.)
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