Cisco boss John Chambers has been forced to backtrack onprevious vows to avoid redundancies, raising the spectre of mass lay offs afterannouncing the networking bellwether’s second quarter profits had dropped by 27%.
Speaking on a conference call, Chambers said 2,000 positionsat Cisco were currently at risk but insisted these job cuts were linked tonormal day-to-day restructuring.
However, he continued: “If business continues to changedramatically we will obviously do what is necessary to bring our expensestructure in line with revenue. If that is the case, lay offs could benecessary as they have been one time in the past.”
Although Cisco beat its own forecasts and analystexpectations, its net profits still fell by over $500m and its shares slippedin after-hours trading. Sales also declined 7% to $9.1bn, reflecting increasedslowdown in orders in December and January. Cisco expects this trend tocontinue, forecasting third quarter sales to drop by as much as 20%year-on-year.
Chambers, renowned for his optimistic outlook in previousstatements, said he was still more bullish than many of Cisco’s competitors.
He remarked: “The length of the downturn is still inquestion and being very candid no one including us really knows how long itwill last. The majority of our customers are guessing 2010 while a smallergroup sees the upturn towards the end of 2009.”
“Given the coordinated activities of global central banksand the extremely large stimulus packages that are being implemented in almostall of our major countries I tend to be a little bit more optimistic than mostof my customers. Time will tell if that optimism is appropriate.”