Cisco Systems Inc raised its full-year revenue and profit forecast as supply chain challenges eased, and announced $600 million in severance and other charges related to a new restructuring that could affect about 5% of its workforce.
In extended trading on Wednesday, the company’s stock rose nearly 5%.
The restructuring will begin in the second quarter of fiscal year 2023, according to the company.
“This is not about reducing our workforce – in fact we will have roughly the same number of employees at the end of this fiscal year as we had when we started,” Cisco said, adding it would focus its resources on its enterprise networking and security businesses.
The restructuring comes at a time when most companies, including Amazon.com Inc) and Facebook’s parent company Meta Platforms Inc, are laying off thousands of employees to prepare for an economic downturn.
Cisco said it would book the charges over the next few quarters, including some costs associated with downsizing its office space as more people work from home.
In a post-earnings call, Chief Executive Chuck Robbins said the company will talk to its employees about the restructuring plan on Thursday.
According to Refinitiv data, Cisco’s revenue in the first quarter was $13.63 billion, exceeding analysts’ expectations of $13.31 billion.
Resolving supply chain issues, as well as Cisco’s recent investments in cloud offerings and targeted price increases, have helped the company improve its business and attract customers in the midst of an economic slowdown.
Cisco anticipates annual revenue growth of 4.5% to 6.5% and adjusted earnings of $3.51 to $3.58. It had previously predicted revenue growth of 4% to 6% for the year, as well as earnings of $3.49 to $3.56 per share, excluding items.
Excluding items, Cisco earned 86 cents per share, which was 2 cents higher than expected.
(Adapted from ITNews.com)