- Guidance cut comes after weak Q2 product sales
- Cost cut plans include shedding 5% of global workforce
- Stock falls more than 5% overnight
IT network giant Cisco Systems (CSCO:NASDAQ) lost more than 5% overnight after slashing around $2.4 billion from full year 2024 guidance (to 31 Jul).
Cisco’s 2024 steer had previously been pitched at $3.87 to $3.93 per share on revenues of between $53.8 billion to $55 billion prior to second quarter results, but slowing network kit sales prompted a rethink that includes plans to cut up to 5% of its workforce to lower costs.
New 2024 guidance was $3.68 to $3.74 of EPS on a $51.5 billion to $52.5 billion revenue range, implying $2.4 billion of revenue slashed from sales, at the respective midpoints.
The share price fall wipes out the last six months of gains, with the stock seen opening later today at $47.61. The shares closed at $50.28 yesterday.
STEEP DROP IN PRODUCT SALES
Product revenue, which accounts for the bulk of overall revenue, fell 9% in the quarter year-on-year, while services added 4%.
Looking to fiscal Q3, the company expects adjusted EPS of $0.84 to $0.86 on revenue in a range of $12.1 billion to $12.3 billion. That was also below consensus estimates, which had been placed at $0.91 EPS on $13.1 billion.
As part of its restructuring plan, Cisco said it would cut about 5% of its global workforce that will result in an $800 million hole from severance and other one-time termination benefits and other costs. The bulk of these costs (roughly $500 million) are expected to be recognised in Q3.
