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Cisco headquarters in San Jose, Calif. (Paul Sakuma)
Cisco headquarters in San Jose, Calif. (Paul Sakuma)

Cisco warns of weakness ahead Add to ...

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

Chief executive officer 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 will be weak, too, as his restructuring effort chugs on.

Executives told analysts a Wednesday conference call that details of its planned global layoffs, will be unveiled toward the end of summer.

Shares of the world's biggest networking equipment maker rose more than 4 per cent 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 Mr. Chambers works to turn around the Silicon Valley bellwether.

Since the rare admission, he has trimmed the company's bloated management structure, offered early retirement to some employees, killed the Flip camcorder and laid off 550 workers.

"Each time we've done this in the past, we've done it crisply and emerged out of it stronger. ... We want to do it surgically instead of with a blunt instrument," he said. "We were all here for the last couple of weeks, 9:30 at night, although the pizza wasn't too good."

Cisco shares slid 1 per cent to $17.72 after rising as much as 4.2 per cent to $18.53 from a Nasdaq close of $17.78.

Analysts wanted to hear how Mr. Chambers intends to revive his bread-and-butter business of selling the plumbing of the Internet and corporate networks. They zeroed in on its switching business, where sales fell 9 per cent in the third quarter after sliding 7 per cent in the second quarter.

Mr. Chambers warned that overall fourth-quarter revenue would be flat to just 2 per cent higher than a year earlier.

"This relieves a bit of investor concern in the near term," said Gleacher & Co. analyst Brian Marshall. "While April results look decent relative to expectations, we've longer-term issues the company needs to address."

The company reported profit, excluding items, of 42 cents (U.S.) per share, for the fiscal third quarter ended April 30, beating the average analyst forecast of 37 cents, according to Thomson Reuters I/B/E/S.

It delivered a non-GAAP gross margin of 63.9 per cent, ahead of its forecast of 62 to 63 per cent.

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

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  • Cisco Systems Inc
  • Updated July 21 4:00 PM EDT. Delayed by at least 15 minutes.

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