For its fiscal third quarter 2017 ended April 29, Cisco today reported declines in revenues of 1 percent, compared to the same quarter last year. And it gave guidance for its fiscal fourth quarter 2017, projecting revenue declines of 4-6 percent year-over year.
Executives didn’t say a word about layoffs during today’s earnings call, but this verbiage was included as a footnote in the company’s SEC 8-K report.
In August 2016, we announced a restructuring plan in order to reinvest in our key priority areas in which up to 5,500 employees would be impacted, with estimated pretax charges of approximately $700 million. In May 2017, we extended the restructuring plan to include an additional 1,100 employees with $150 million of estimated additional pretax charges. During the first nine months of fiscal 2017, we have recognized pretax charges of $614 million to our GAAP financial results in relation to this restructuring plan. We expect to recognize approximately $150 million to $200 million of pretax charges under this plan in the fourth quarter of fiscal 2017. We expect this plan to be substantially completed by the end of the first quarter of fiscal 2018.
Shares of Cisco stock have fallen 7.72 percent to $33.83 in after hours trading.
On the earnings call, Cisco CEO Chuck Robbins stressed several times that the company is transitioning to more software and subscription-based business. Robbins said, “I am pleased with the progress we are making on the multi-year transformation of our business.”
For its fiscal third quarter 2017, Cisco reported revenue of $11.9 billion, a decrease of 1 percent year-over-year. And the company reported third quarter non-GAAP net income of $3 billion, or $0.60 per share, up 5 percent from the same quarter a year ago.
But the projection of revenue declines for the next quarter dominated questions from analysts on the earnings call.
Robbins blamed several factors for the lower guidance. He said there’s “a pretty significant stall right now” in the U.S. federal public sector with a lack of budget visibility. He said service provider revenues were down, with a lot of that decline happening in Mexico. In the United Kingdom business is being dampened by currency issues. And he said there is “pressure in the Middle East relative to oil prices.”
Recently, Cisco has been on an acquisitions roll, which Robbins re-capped on the call. Cisco completed its purchase of AppDynamics, a company that provides cloud application and business monitoring platforms. It announced its intent to acquire Viptela, a privately held software-defined wide area network (SD-WAN) company. It also announced its intent to acquire the Advanced Analytics team and associated advanced analytics intellectual property developed by Saggezza. And, finally Cisco is buying MindMeld, a privately held artificial intelligence (AI) company.