Cisco slashes sales outlook, enters new era

Tue Sep 13, 2011 6:58pm EDT
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By Alistair Barr and Sinead Carew

SAN FRANCISCO/NEW YORK (Reuters) - Cisco Systems Inc slashed its long-term forecasts, acknowledging an end to an era of scorching growth after cutting thousands of jobs in a sweeping four-month reorganization.

The reduction in projections had been expected from a company grappling with both nimbler rivals and a rickety global outlook for government and corporate tech spending. Yet investors pushed its shares 1.6 percent higher, relieved the overhaul was bearing fruit: reducing costs and setting Cisco on a path for slower but more stable growth.

CEO John Chambers in April launched a broad restructuring after declaring that the erstwhile Wall Street darling had lost its way. That included plans to reduce its workforce by about 15 percent -- with nearly 13,000 taken off its payroll so far -- and shutter its Flip video camera division.

Investors have turned cautiously optimistic at the pace with which the revamp has progressed. And on Tuesday, Chambers said customers he spoke to in the past 120 days had all pledged to either keep their spending with Cisco intact, or even increase it.

"Cisco was very upbeat. It sounds like their efforts in terms of streamlining the company and simplifying the structure are paying off and allowing the company to execute better at least in the near term," Sterne Agee analyst Shaw Wu said.

Analysts generally applauded the speed with which Chambers has restructured the business in roughly 120 days.

Sources familiar with the situation told Reuters this week that the 62-year-old CEO is looking to end his 16-year run on a high note, with the company on firmer footing. They said speculation has centered around a succession by the likes of Silicon Valley veteran and Oracle president Mark Hurd once Cisco returns to stable growth.

"In terms of the board and the management team, we're completely in sync," Chambers said. "They asked me personally would I be willing to commit to another three years."   Continued...

<p>John Chambers, Chairman and Chief Executive Officer of Cisco, participates in a panel discussion titled "Enhancing Access to Modern Technology," at the Clinton Global Initiative, in New York, September 23, 2010. REUTERS/Chip East</p>