Cisco Slashes 17% of Jobs, Hints at Earnings Shortfall

Citing evidence of what it called an expanding worldwide economic slowdown, Cisco (CSCO Quote) Friday set plans to slash its workforce by around 15% while hinting at a third-quarter earnings shortfall.

The networker, which has been rumored this week to be considering smaller job cuts, said it would slash 3,000 to 5,000 full-time and 2,500 to 3,000 temporary and contract jobs. Cisco employs 44,000 full-time and 4,000 temp workers. The cuts will take place in coming months through what the company coyly called "voluntary attrition, involuntary attrition, and the consolidation of some positions."

Death of a Thousand Cuts Telecom outfits slashing jobs fast and furious
Company	Job cuts	% of staff	Date
Cisco (CSCO:Nasdaq)	8,000	17%	March 9
Nortel (NT:NYSE)	10,000	10%	Feb. 16
Lucent (LU:NYSE)	10,000	10%	Jan. 25
Motorola (MOT:NYSE)	4,000	3%	Feb. 12
JDS Uniphase (JDSU:Nasdaq)	3,000	10%	Feb. 28
Corning (GLW:NYSE)	825	5%	March 1
IronBridge (private)	170	90%	Jan. 31
Source: Companies

Though it offered no specific earnings guidance, the company also made a vaguely cautionary comment about its financial projections. "While Cisco is only five weeks into the third quarter and it is premature to quantify the impact of this current business climate, we do expect a wider range of estimates for the remainder of this fiscal year," financial chief Larry Carter said in a press release. Wall Street expects Cisco to earn 14 cents a share on around $6.5 billion in revenue for each the third and fourth quarters, according to data culled by First Call/Thomson Financial.

Cisco, which long held that a second-half bounceback for the economy would boost the fortunes of telecom equipment companies, also said in the press release that it now believes that "this slowdown in capital spending could extend beyond two quarters," seemingly precluding the so-called V-shaped recovery bulls were banking on. The company set a charge of $300 million to $400 million to cover the costs of the layoffs.

Trading in Cisco shares picked up sharply when the announcement hit the wires at around 3:30 p.m. EST, but the stock didn't change direction. In late afternoon trading, Cisco was off $2.19, or 9.6%, at $20.62, putting it at a two-plus-year low.

In making the cuts, Cisco joins a long rank of telecom outfits now sharply cutting back employment as the economic slowdown and the industrywide spending pullback punish sales growth.