By Dan Gallagher
How good was Cisco Systems’s most-recent fiscal year? Too good, as it turns out.
The maker of networking and telecommunications equipment said late Wednesday that revenue fell nearly 6% year over year to $12.8 billion in its fiscal second quarter ( ended January. That was in line with the company’s prior forecast, but also the most significant revenue decline Cisco has seen in more than three years. The company projected an even steeper drop of 16% for the current quarter, ending April.
The recent declines mark a rapid change of fortune for Cisco. The company saw a boom in sales ( in the fiscal year that ended in July, as customers snapped up equipment that had been hard to come by during the pandemic’s supply shortages.
Cisco’s revenue rose 10.6% for the year, its best annual performance in more than a decade. But many of the customers that bought up that gear are taking their sweet time installing it, crimping demand for more sales. Other customers are slowing their orders due to the global economy; Cisco CEO Chuck Robbins said on Wednesday’s conference call that demand is particularly weak among telecommunications providers.
This caused Cisco to cut its forecast for the current fiscal year for a third time. The company now expects revenue to fall nearly 9% for the year, compared to the 1% growth it was expecting just six months ago.
That would make for Cisco’s worst annual sales drop since 2002, which helps explain why the company is now scrambling to cut costs. Cisco said Wednesday ( that it plans to cut its workforce by 5%, which equates to more than 4,000 people and would essentially erase the headcount growth the company has seen over the last two years.
Cisco’s shares slipped nearly 2% Thursday morning, a seemingly mild move given the latest news. But that follows a drop of nearly 10% following the company’s last report, and the stock was already in the doghouse, carrying a 12-month gain of less than 4% heading into Wednesday’s report. That would make it one of the worst performers among tech companies valued over $100 billion.
“If we learned one thing over the years, you don’t get positive on a hardware stock unless there is visibility on the product cycle,” wrote Ben Reitzes of Melius Research.
Cisco’s rough year isn’t over.