Cisco to cut up to 8,000 workers

Cisco Systems plans to cut up to 8,000 workers, or 16 percent of its
overall work force, because of concerns that the tough U.S. economic climate
could worsen and spread internationally.


Cisco on Friday announced it will cut between 3,000 to 5,000 full-time
positions. That's between 7 percent to 11 percent, of its 44,000 full-time
employees worldwide. The networking giant will also lay off
between 2,500 to 3,000 part-time and contract workers. The company
currently employs 4,000 temporary employees.

News of the layoffs initially leaked out Thursday. The company made its
announcement at the close of the market Friday.

Cisco's stock fell 10 percent Friday, dropping $2.19 to $20.63.


Analyst Seth Spalding of Epoch Partners said it wouldn't surprise him if
Cisco lowers revenue estimates sometime in the future. The company is
probably facing slower sales of business networking products in Europe
and Asia, he said.

Spalding added that Cisco's stock drop on Friday was more a
reflection of the entire stock market downturn, rather than investor
skittishness over Cisco itself.

"It's an overreaction. Cisco is down more due to the fact that the whole
market was down," he said.


Cisco executives said the continued slowdown in the U.S. economy could
also reduce sales of its networking equipment. The work force reductions
will include normal attrition, they said.

"We're taking these steps because of the continuing slowdown in the U.S.
economy and initial signs of a slowdown expanding to other parts of the
world," Cisco Chief Executive John Chambers said in a statement. "We also
now believe that this slowdown in capital spending could extend beyond two
quarters."

The company, however, stopped short of revising its earnings estimates for
the current third quarter and beyond.

"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," Cisco
Chief Financial Officer Larry Carter said in a statement.

In a conference call with analysts last month, Chambers had warned that
sequential revenue growth for the next two quarters will be flat. He also
predicted that Cisco's revenue for the current fiscal year would grow
40 percent over last year. But that prediction was based on the assumption
that the U.S. economy would recover in the second half of this calendar
year and that the economic slowdown doesn't spread
internationally.

Cisco in February missed second-quarter earnings expectations by one
penny because of sluggish sales of networking equipment to
telecommunications service providers. The company also saw slack sales
to businesses, particularly in manufacturing, Chambers had said.

With Friday's reductions, Cisco plans to take a one-time charge of $300
million to $400 million by the end of the current fiscal year. The
company also plans to cut other costs, such as travel and marketing.