Cisco's troubles a taste of things to come


Cisco's troubles a taste of things to come

Lisa Kelly
In the wake of networking giant Cisco System's disastrous fourth-quarter results, industry watchers say the worst is yet to come and are predicting an IT job cull across the sector.

Cisco's net income of $7m (£5m) was a 99% reduction on 2000 figures. Revenue for the quarter ended 28 July amounted to $4.3bn, a 25% drop compared to the corresponding period last year. Its third quarter showed a 4% revenue decline. However, the company made analysts' earning estimates of 2 cents per share.

Many analysts see Cisco's fortunes as an acid test for the IT sector's prospects - and it appears gloomy, with the company planning 8,500 lay-offs.

Richard Holway, the director of Ovum Holway, said, "There will be more bad news to come. I don't believe it is all worked through. For too many quarters, companies like Cisco have been saying it will get better, but the point of no return has been passed. CEOs [chief executive officers] are finally realising they must take action."

As a result, Holway predicts, "a flood of new cost-cutting measures and a job cull in the next couple of quarters".

"I am extremely fearful for the IT services and software industry," he added.

Keith Humphreys, a senior consultant for Eurolan Research, said, "It is a horrible, depressing set of results. There are no signs of optimism from Cisco. If they'd stopped their hiring policy earlier they wouldn't have to make so many lay-offs."

CEO John Chambers blamed the economic climate for Cisco's poor results and predicted that European and Asian economies have a lot further to fall. "The European theatre looks depressing," he said. "It is one quarter behind the US and most countries have been impacted by the global economic slowdown, but I expect it to get challenging before it gets better."

Email Alerts

Register now to receive IT-related news, guides and more, delivered to your inbox.
By submitting your personal information, you agree to receive emails regarding relevant products and special offers from TechTarget and its partners. You also agree that your personal information may be transferred and processed in the United States, and that you have read and agree to the Terms of Use and the Privacy Policy.

COMMENTS powered by Disqus  //  Commenting policy