Cisco Systems (CSCO.O), navigating a challenging market that has resulted in thousands of layoffs by IT firms this year, announced that it would reduce its annual revenue target and eliminate 5% of its global workforce, or over 4,000 jobs.
Moreover, the manufacturer of networking equipment saw a more than 5% decline in its shares during extended trading on Wednesday after Cisco lowered its prior prediction from $53.8 billion to $55 billion to $51.5 billion.
CEO Charles Robbins stated during a conference call, “We also continue to see weak demand with our telco and cable service provider customers.”
Analysts predict that the telecom industry’s clients will continue to curtail expenditure and prioritize getting rid of their surplus inventory of networking hardware, which would put pressure on demand for Cisco’s goods.
According to Joe Brunetto, an analyst at Third Bridge, the networking gear inventory backlog should clear up in the second half of 2024 or the first half of 2025.
To spur growth, Cisco is concentrating on artificial intelligence and its collaboration with Nvidia. In addition, Nvidia (NVDA.O), according to CEO Robbins, has consented to use Cisco’s Ethernet with its own technology, which is extensively utilized in data centers and AI applications.
ESEG data indicates that Cisco is projecting third-quarter revenue in the range of $12.1 billion to $12.3 billion, which is less than the $13.1 billion predicted.
Eighty-five-person company was preparing for restructuring and layoffs in order to concentrate on high-growth areas, three people with knowledge of the situation told Reuters earlier this month.
It anticipates realizing the majority of the $800 million charge related to the layoffs in the first half of fiscal 2025. The charge includes severance and other costs.
Cisco reported second-quarter revenue of $12.79 billion and adjusted earnings of 87 cents per share, both exceeding LSEG forecasts.
