J.P. Morgan says job cuts possible in wake of expected revenue decline of 21% for fiscal year April 14, 2009 (Computerworld) Forecasting a significant drop in revenue for the fourth quarter, a J.P. Morgan analyst today reported that Cisco Systems Inc. "could" soon announce a workforce reduction of 10%, which would be equal to about 6,600 employees.
The analyst, Ehud Gelblum, said a 10% reduction would save the networking company about $900 million a year.
"We expect Cisco to guide fourth fiscal quarter revenue down 17-22%, year over year, as demand continues to deteriorate, in-line with our estimate for a 21% year over year decline," Gelblum wrote in his 49-page first-quarter 2009 preview of communications equipment and networking companies. Cisco's fourth fiscal quarter ends July 31. "We believe Cisco could also announce a 10% headcount reduction, which we calculate could save $900M annually," he wrote.
The dismal sales outlook for Cisco, and the possibility of layoffs, comes as two Cisco competitors, Juniper Networks Inc. and F5 Networks Inc., recently lowered sales projections, citing a drop in purchases of networking equipment by their customers.
Gelblum said that both Juniper and F5 were able to increase their earnings-per-share expectations despite expected revenue declines because they had made aggressive cost cuts.
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