Cisco to Miss Estimates, Announces 8,500 Layoffs

Cisco Systems Inc., the biggest maker of gear that helps to power the Internet, said on Monday that its third quarter pro forma earnings will miss analyst forecasts and that it will lay off a total of 8,500 workers -- in line with its earlier estimate of job force reductions.

Cisco, saying that the current business environment "has never been more challenging," said that it now sees fiscal third-quarter pro forma per-share earnings in the "very low" single-digit range and that sales will fall 30 percent from second-quarter levels. Thomson Financial/First Call pegged Cisco's second-quarter per-share profit at 8 cents.

The San Jose, Calif.-based computer-networking concern also said it plans to take a restructuring charge associated with the layoffs of $800 million to $1.2 billion as well as a charge for excess inventory of about $2.5 billion. Gross margin -- or the percentage of sales remaining after subtracting product costs -- will be in the low- to mid-50 percent range.

"This may be the fastest any industry our size has ever decelerated, which has required us to make difficult business decisions at an unprecedented speed," said Cisco Chief Executive John Chambers in a statement. The company added that macro-economic concerns have clearly spread to other regions of the world, such as Asia Pacific and Europe.