Cisco has forecast first quarter revenue and profit below Wall Street estimates and laid out a restructuring plan, as the coronavirus crisis forced its clients to hold back spending. Shares of the top network equipment maker fell nearly five per cent after the bell.
The restructuring, which includes a voluntary early retirement program and layoffs, will begin this quarter, the company said, adding that it expected to recognise a related one-time charge of about US$900 million.
On a conference call with investors, CEO Chuck Robbins said Cisco also plans to reduce its expenses by $1 billion on an annualised basis "over the next few quarters."
The company also announced that chief financial officer Kelly Kramer will retire from Cisco, but will remain with the company until a successor is found.
Cisco expects current-quarter revenue to drop between nine per cent and 11 per cent from last year, implying a range of between $11.71 billion and $11.97 billion, while analysts had expected $12.25 billion. It also forecast adjusted earnings of 69 cents to 71 cents per share, below estimates of 76 cents, according to Refinitiv IBES data.
Kramer told Reuters that Cisco will continue to acquire smaller companies to help boost revenue and that its $2.84 billion acquisition of Acacia Communications Inc remains on track. The deal was slated to close before the end of Cisco's fiscal 2020 last month, but the company said it is still awaiting approval from Chinese regulators.
"We still feel good about it. We're responding to their requests as fast as we can to make sure there are no issues," Kramer said. "We are focused on getting it done."
For the fiscal fourth quarter ended July 25, revenue fell about nine per cent to $12.15 billion, but beat estimates of $12.08 billion, as more people working from home boosted demand for its web security and teleconferencing tools. Excluding items, Cisco earned 80 cents per share in the quarter, beating estimates of 74 cents.
(Reporting by Ayanti Bera in Bengaluru and Stephen Nellis in San Francisco; Editing by Sriraj Kalluvila, Richard Pullin and Grant McCool)