Cisco's disappointing fiscal Q3 profit, outlook could drive more job cuts

Cisco (Nasdaq: CSCO) just can't seem to get out of its own way, and its fiscal Q3 reflects that trend with profits down 18 percent and plans to lay off even more employees in poorly performing divisions.

And the outlook is not any better, with Cisco's CEO John Chambers predicting that its current quarter's revenue outlook would be flat to up 2 percent.

Chambers said during the company's earnings call that it plans to cut $1 billion in expenses.

"We are moving quickly to fix what is broken," said Chambers. "We've had to make big changes before and each time we have made these changes, we've emerged even stronger. We are embarking on a course that will address our challenges while building on our foundational strengths."

The vendor's switching and routing units, key pieces of the vendor's dynasty, were a mixed bag. During the quarter, switching declined 9 percent in Q3, which were slightly offset by a 7 percent increase in router sales.

Two of the emerging stars in Cisco's product portfolio are video conferencing and wireless, which were up 39 and 32 percent, respectively.  

Over the past few months, Cisco has made some radical moves to turn its fortunes around by shutting down its Flip camera business, a process that drove it to lay off 550 employees, and simplifying its management structure.

Despite these changes, financial analysts argue the vendor needs to provide a more clear picture on its ultimate company strategy.

 "It's great that they acknowledged the elephant in the room," said Joanna Makris, an analyst at Mizuho Securities USA Inc. "We all knew 12 to 17 percent wasn't valid. But what is it--8 percent, 10 percent? It's hard for us to know until they tell us which product lines they're going to exit."

Cisco narrowly beat Wall Street analyst expectations in Q3 with $1.8 billion in net income, or 33 cents a share, down 18 percent from $2.2 billion, or 37 cents a share, a year ago. Revenue, meanwhile, was $10.9 billion, up 5 percent from $10.4 billion.

For more:
- see the earnings release
- here's FierceVoIP's take
- Wall Street Journal has this article (sub. req.)
- Bloomberg has this article

Related articles:
Cisco appoints Juniper's David Yen to revamp server business
Wireline in the first quarter of 2011
Cisco shuts down Flip video business, dismisses 550 employees
Cisco's Chambers plans to overhaul company focus

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