Cisco Issues Warning, to Lay Off 8,500


Things are now getting serious.

Citing the spiraling telecommunications market and subsequent spending
slowdown, Cisco Systems Inc., the largest maker of Internet-network equipment,
said it will miss its third-quarter earnings forecast and hand out pink slips to
about 8,500 workers.

On the financial front, Cisco said it expects revenue for its fiscal third
quarter to be down 30 percent from the previous quarter's $6.7 billion. The
company said it will generate a profit this quarter, although pro-forma earnings
per share will hit 'in the very low, single-digit range.'

'The business environment that our segment of the IT [information-technology]
industry is facing has never been more challenging,'' president and CEO John
Chambers admitted in a press release. 'This may be the fastest any industry our
size has ever decelerated, which has required us to make difficult business
decisions at an unprecedented speed.'

Hoping for an eventual turnaround, Cisco said long-term, it expects to see
its segment of the IT industry grow at a clip of 30 percent to 50 percent per

On the news, Cisco shares dropped about 78 cents Monday, or 4.3 percent,
closing at $17.20. Cisco shares hit $13.18 -- a new 52-week low -- during
intra-day trading April 4. Cisco's 52-week high occurred May 1, 2000, when its
shares traded at $71.87.

Cisco said it will likely take an $800 million to $1.2 billion restructuring
hit and a $2.5 billion charge for excess inventory.

Of Cisco's 8,500-layoff figure, 2,500 of those staffers are temporary and
contract workers. Those cuts will save the company $1 billion annually, Cisco

Although the economic environment in the United States 'continues to be
challenging,' Cisco also is experiencing soft market conditions in areas of the
Asia-Pacific region and in Europe.

Cisco is among several large technology companies to announce large layoffs
in the past few months. Others include Motorola Inc. (22,000), Lucent
Technologies (16,000) and ADC Telecommunications Inc. (6,000 to