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Cisco issues third quarter warning

Networking giant says revenues will be 30% lower than second quarter sales. Cisco's business "has never been more challenging," says CEO John Chambers.

Cisco is warning analysts that it’s third quarter results will be worse than Wall Street forecasts. The networking giant predicted that its revenues would be 30% below second quarter sales coming in at $4.7 billion — $200 million less than sales for the same quarter last year.

The results are the first year-on-year drop in revenues in the vendor’s 11 years as a publicly traded entity.

Cisco also detailed restructuring plans that included layoffs and consolidation of its global facilities, which would cost around $1 billion. Cisco’s business “has never been more challenging,” said Cisco CEO John Chambers in a post announcement conference call.

“In fact, this may be the fastest any industry our size has ever decelerated, which has required us to make difficult business decisions at an unprecedented speed,” he added.

Cisco has largely attributed its current situation to the downturn in corporate spending on telecommunications kit. Cisco’s 50% per year revenue growth demonstrated between 1995 and 2000 is expected to flatten out in the coming years, but Chambers is confident the vendor will still be able to grow at 30-to-50% per year.

“This is the same commentary we gave in the first fiscal quarter, and it is the same commentary we have given for the last seven years,” said Chambers. “We have had a great decade in business growth, and we will have an equally strong next decade,” he added.

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