Tech giant Cisco to cut 4,000 jobs

NEW YORK CITY — Information technology giant Cisco announced Wednesday that it will cut 4,000 jobs, equal to five percent of its workforce.

Cisco executives said the cuts were necessitated by a weaker-than-expected economic recovery, with conditions especially disappointing in emerging markets.

The “economic recovery is slower and more inconsistent,” chief executive John Chambers told analysts.

While the US market has been getting better, that improvement is offset by “softening” in emerging markets, Chambers added.

Chambers emphasized the company’s need to “move fast” as it rebalances staff to meet growth areas. He said some of the downsized workers will undoubtedly be rehired in other posts.

“I have learned in this industry you lead with your mind, not with your heart,” Chambers said.

The cuts announced Wednesday came despite an 18.2 percent rise in earnings, and pushed Cisco shares 9.1 percent lower to $23.97 in after-hours trade.

Wednesday’s job cuts mark the third consecutive summer the company has downsized.

In July 2012, Cisco eliminated 1,300 jobs, citing global economic uncertainty. In July 2011, it eliminated 6,500 posts as part of a major company restructuring.

Cisco reported fiscal fourth quarter earnings of $2.3 billion on revenues of $12.4 billion, up from the year-ago level of $1.9 billion on revenues of $11.7 billion.

Per-share earnings exceeded analyst expectations by one cent at 52 cents per share.

Cisco officials signaled that first-quarter revenue growth will be in the 3-5 percent range, with earnings per share expected at 50-51 cents. The updated outlook was in line with analyst expectations, but a bit on the low end.

Cisco has been expanding its profile in some targeted growth areas such as cloud computing and Internet security with a run of recent acquisitions.

source: interaksyon.com

Obama 'cliff' remarks spark US stocks sell-off

NEW YORK - US stocks tumbled Wednesday as President Barack Obama challenged Republicans to accept tax increases for the wealthy in a deal to avert the year-end fiscal cliff.

After opening higher, helped by Cisco Systems's strong earnings, share prices slid and then turned more sharply downward after Obama laid out his terms for a deal in his first news conference since his re-election.

Wall Street stocks closed at their lowest level in more than four months after Obama drew a hard line against Republicans in the battle for a compromise to avoid automatic spending cuts and tax increases that take effect in January.

"The president's statements failed to inspire investor confidence, thus resulting in an afternoon sell-off," said Briefing.com analysts.


The Dow Jones Industrial Average dropped 185.23 points (1.45 percent) to 12,570.95, its lowest close since June 26.

The broad-market S&P 500 lost 19.04 (1.39 percent) at 1,355.49, while the tech-rich Nasdaq Composite gave up 37.08 (1.29 percent) at 2,846.81.

Bank of America led the Dow rout, sliding 3.6 percent, followed by General Electric, down 3.2 percent.

Dow component Cisco was the sole blue-chip gainer, jumping 4.8 percent after its 48 cents earnings per share for the fiscal first quarter beat analyst expectations by two cents.

Abercrombie & Fitch, the retailer of trendy clothing for youth, soared 34.5 percent after turning in a 40 percent jump in third-quarter profit and sharply increasing its forecasts for the full year.

Office supplies chain Staples added 2.6 percent after reporting an expected quarterly loss due to impairment charges mainly related to its struggling European business.

Excluding that, its earnings per share came in flat, and around analyst expectations.

On the Nasdaq, Dell added 1.9 percent and Facebook gained 12.6 percent, despite a lifting of a share-sale ban for insiders, while Apple fell 1.1 percent.

Starbucks dropped 2.9 percent after announcing it would buy tea chain Teavana for $620 million.

Bond prices were mixed.

The 10-year US Treasury yield was unchanged from Tuesday at 1.59 percent, and the 30-year rose to 2.73 percent from 2.72 percent.

Bond prices and yields move inversely.

source: interaksyon.com

Cisco Still Pessimistic on Europe, Raises Dividend

(Reuters) - Cisco Systems Inc offered little hope that dire economic conditions in Europe would come to an end any time soon but pleased investors with a 75 percent dividend hike as the company posted quarterly results that beat estimates.

The world's largest network equipment maker had spooked investors three months ago, when Chief Executive John Chambers cautioned that macroeconomic conditions in Europe could hurt technology spending but now analysts expect Chambers to remain cautious.

Chambers said on a call with analysts that Europe would stay challenging over the next several quarters.

"That's probably going to get tougher before it gets better and that might last for a good little while," Chambers said, adding that public spending in the United States and Europe would remain weak.

As a result, Chambers said, "many of our customers continue to anticipate a challenging next 12 months on a global basis and therefore these CEOs will remain conservative both in their IT expenditures but also in their hiring."

Factoring that in, Cisco expects revenue growth, excluding items and its acquisition of TV software developer NDS, to range from 2 to 4 percent while earnings per share are seen up 5 to 0 percent at 45 to 47 cents, in line with analysts' expectations.

The San Jose, California-based company also said its dividend will rise to 14 cents per share in the first quarter of fiscal 2013 and that it plans to return a minimum of 50 percent of free cash flow annually through dividends and share repurchases.

Analysts welcomed the dividend hike but some wondered how revenue growth could be improved.

"It's a significant increase and now they've got a real yield," BGC analyst Colin Gillis said about the dividend, adding that he estimated the yield was at 3.2 percent versus 1.8 percent previously.

JMP Securities analyst Erik Suppiger said that while investors are happy that the spending cuts are boosting Cisco's profits, revenue growth is essential to the networking giant's long-term success.

"Ultimately the company needs to generate some acceleration in revenue growth," Suppiger said.

He added that it remains to be seen whether Chambers can get revenue growing again if he continues to cut spending, particularly sales and marketing.

Cisco kicked of a major restructuring program last year that included plans to slash about 15 percent of its work force and cut expenses by about $1 billion.

Last month it announced it would cut another 1,300 jobs across the company.

Cisco's fourth-quarter results beat estimates, thanks to cost savings and a continuing restructuring program.

Quarterly net income, excluding items, was $2.5 billion or 47 cents per share, compared with analysts' average estimate of 45 cents a share as compiled by Thomson Reuters I/B/E/S.

Revenue rose 4 percent from the year-ago quarter to $11.7 billion, compared with a Street view of $11.61 billion.

Cisco shares rose 5 percent to $18.23 after closing up 1 percent at $17.35 on Nasdaq.

source: nytimes.com