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Cisco issues earnings warning

May 11, 2011|Reuters

Cisco Systems Inc. warned Wednesday of another weak quarter as it struggles to revive growth, wiping out a short-lived stock price rally after its quarterly profit beat Wall Street's expectations.

Chief Executive John Chambers, who put his job on the line last month by admitting that the Silicon Valley bellwether had lost its way, cautioned that the current quarter would be weak too as his restructuring effort chugs on.

Executives said details of Cisco's planned global layoffs would be unveiled toward the end of summer.

Shares of the world's biggest networking equipment maker rose more than 4% before slipping into negative territory in after-hours trading.

"Cisco is in a period of transition. There's a very negative camp that believes that Cisco is in a long decline … which is why the stock is so inexpensive," said Evercore Partners analyst Alkesh Shah.

The results come as Chambers works to turn around the company. He has trimmed the bloated management structure, offered early retirement to some employees, killed the Flip camcorder and laid off 550 workers.

Cisco shares slid 1% to $17.72 from a Nasdaq close of $17.78.

Chambers warned that fourth-quarter revenue would be flat to just 2% higher than a year earlier.

The company reported profit, excluding items, of 42 cents per share, for the fiscal third quarter that ended April 30, beating the average analyst forecast of 37 cents, according to Thomson Reuters.

Net income fell to $1.8 billion, or 33 cents per share, from $2.2 billion, or 37 cents, a year earlier.

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