Tuesday, May 10, 2011

Cisco Sees Slower Growth, Restructuring Underway

Cisco posted revenue of $10.9 billion for its third quarterly of fiscal 2011, an increase of 5% year over year and slightly ahead of expectations. Q3 net income was $1.8 billion (GAAP), or $0.33 per share, a decrease of 11% year over year.


"This quarter played out as we expected," said John Chambers, chairman and CEO, Cisco. "We have acknowledged our challenges. We know what we have to do. We have a clear game plan, and we are a company with a track record of market-shaping innovation. We thank our shareholders, employees, customers and partners as we transition to the next phase of Cisco."


In a conference call, Cisco said it is taking step to simplify its organization and reduce costs by $1 billion in its FY '12 expense run rate. This is likely to include job cuts, although the number was not specified. Cisco is also divesting or exiting underperforming operations, including the Flip consumer camera division which was dropped last month. The company will also start issuing quarterly dividends. Looking ahead, Chambers said Q4 is likely to continue to show weakness as the company works through these various issues. The company expects Q4 revenue growth to be in the range of flat to up 2% on a year-over-year basis. The long term growth target of 12 12-17% is also "not reflective" of the current environment.


Regarding areas of its business that are "under pressure", Cisco cited: consumer, traditional set-top boxes, switching, and its Public Sector Customer segment. Product transition is underway in switching.


Some other highlights for the quarter:


Non-GAAP product gross margin was 63.1%, down 2.2 points


Employee headcount is 73,408, which is an increase of 473 from last quarter, approximately 40% of which were from acquisitions.


Cash and cash equivalents and investments were $43.4 billion at the end of the third quarter of fiscal 2011, compared with $40.2 billion at the end of the second quarter of fiscal 2011, and compared with $39.9 billion at the end of fiscal 2010.
http://www.cisco.com

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