Cisco the latest network supplier to feel economic chill

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Cisco the latest network supplier to feel economic chill

Paul Kunert

Industry bellwether Cisco has become the latest vendor to implement a hiring freeze and clamp down on travel expenses after fiscal first quarter 2009 sales grew at their slowest rate in three years.

In the three months to 25 October, Cisco revenues rose 8% to $10.3bn as profits declined 0.2% year-on-year to $2.1bn. The networking giant warned worse is to come in its fiscal second quarter, forecasting a 5% to 10% drop in sales.

"All of us are seeing the same financial global economic challenges that have occurred over the last quarter, especially in the month of October," said John Chambers, CEO at Cisco.

"We are seeing customers not just in the financial, automotive or retail sectors but across most of our enterprise industries facing what they view as very challenging business environments," he said.

To see it through the market conditions, Cisco has realigned $500m of resources to priority sectors including next generation customer relationships or Cisco 3.0, collaboration/ Web 2.0, data centre virtualisation, video and globalisation.

"Beginning in the second quarter, our goal is to realign another $500 million of resources while at the same time reducing our expenses for fiscal year 2009 by over $1 billion from our original budget," said Cisco's chief.

The goal is to make these changes by the end of its fiscal year 2009, "This includes a pause on hiring, as well as reductions in travel, off site meetings, outside services, equipment, events, prototypes, marketing and other activities".

Switching revenues rose 8% to $3.6bn, routing sales went up 1% to $2.7bn, Advanced Technologies including UC, wireless and storage rose 17% to $2.7bn with services and other products revenues worth $1.7bn and $442m respectively.

US market revenues grew 1% to $5.5bn, sales in Europe and Asia climbed 13% and 41% respectively to $2.2bn and $1.2bn, Asian Pacific grew 4% to $1bn and Japan saw a rise of 23% to $400m. The UK declined by double digits.

Sales dipped toward the end quarter having started off well and given this variability Chambers said it was the "second most difficult time in my career" to forecast the next three months but said Cisco expected revenues to fall 5% to 10%

Last month, Microsoft announced plans to recruit had been put on ice and only yesterday Dell told MicroScope it too was postponing European hiring plans.

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