Cisco Warns of Big Miss, to Slash 8,500 Jobs

Cisco, warning that the current business environment "has never been more challenging," said it now sees fiscal third-quarter pro forma per-share earnings in the "very low" single-digit range and that sales will fall 30% from second-quarter levels. Thomson Financial/First Call pegged Cisco's second-quarter per-share profit at eight 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% 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," Cisco Chief Executive John Chambers said in a statement. The company added that macro-economic concerns have spread to other regions of the world, such as Asia-Pacific and Europe.

Cisco closed down 4%, or 76 cents, to $17.22 before the after-the-bell warning. Its shares have traded as high as $71.87 and as low as $13.18 over the past 52 weeks.

Cisco has been lowering estimates and guiding forecasts since February as the economic slowdown began hitting its orders and customers cut back on spending.

Cisco shares moved sharply lower to $15.77 after the warning and scheduled a conference call to explain the warning, its first formal shortfall.

Cisco was forecast to generate third-quarter sales of $5.95 billion, and profit before charges and acquisition-related costs of 8 cents a share, the average estimate of analysts. A 30% decline would imply revenue of about $4.73 billion in the fiscal third quarter.

Shares of Juniper Networks (JNPR) also were lower in the after-hours on the Cisco warning.