Cisco expects Q3 revenues to drop by 30%
Middle East tech investors may have enjoyed the NASDAQ's rally over the past week, but the market is expected to react badly today to more bleak forecasts from Cisco.
Middle East tech investors may have enjoyed the week long rally in the NASDAQ, but they have more bad news to face today. Cisco, once the darling of Wall Street, issued a warning after the closing bell yesterday that its third quarter revenues will be 30% lower than the three months ending January 31.
The company is also expected to barely scrape a profit, with analysts being told to expect “very low single-digit range” earnings. The company’s stock dropped 8% of its value in after-hours trading.
To cope with the slowdown, Cisco is axing 8500 jobs, at a cost of $300-$400 million in redundancy payments. These exceptional costs will come on top of $2.5 billion for excess inventory, $300m-$500m for closing offices and factories and $200m-$300m for writing off goodwill.
"The business environment that our segment of the IT industry is facing has never been more challenging. This may be the fastest any industry our size has decelerated, which has required us to make difficult business decisions at an unprecedented speed," said John Chambers, Cisco’s chief executive.
Cisco also warned that its revenues in the three months to July will be down by up to 10pc. It said US markets continue to be "challenging" while the slowdown has spread to Europe, Korea, Taiwan, Australia and Japan.