Cisco CEO Chuck Robbins participates in an interview with Bloomberg Television at the World Economic Forum in Davos, Switzerland on January 18, 2023.
Hollie Adams | Bloomberg |
Cisco Shares rose about 7% on Thursday, notching their best day since November 2020, after the computer networking company announced plans to cut 7% of its workforce and reported quarterly results that beat analysts' estimates.
In a note to investors, analysts at Morgan Stanley said Cisco's results were better than feared.
“Cisco's outperformance in the fourth quarter and better-than-expected orders were a relief and helped Cisco return to more predictable patterns after nearly four years of disruption,” wrote the analysts, who recommend buying the stock.
Cisco reported revenue of $13.64 billion for the quarter, beating Wall Street estimates of $13.54 billion. Revenue fell 10 percent from the year-ago quarter, marking the third consecutive quarter of revenue declines. Net income plunged 45 percent from a year ago, but profits still beat expectations.
Bank of America analysts noted that network revenue fell 28.1% year-on-year, but said this was mainly due to difficult comparisons and that the focus of the quarter was on the recovery in orders.
“Data center switching orders increased double-digit year-over-year, while campus switching and routing orders increased high single-digits,” the analysts, who rate Cisco as a “buy,” wrote in a report. They added that artificial intelligence-related orders had exceeded the $1 billion mark and revenues would increase in the first half of 2025.
The company's core business of routers and switches has struggled as large enterprises move to the cloud. Cisco's revenue was partially offset by recurring revenue from its software and securities businesses.
Cisco said in a statement that the company is implementing a restructuring plan with layoffs that will result in a $1 billion charge to pre-tax financial results and will enable the company to “invest in key growth opportunities and increase the efficiency of its business.”
CEO Chuck Robbins told CNBC's “Squawk on the Street” on Thursday that the company will look to transfer some employees to other jobs within the company.
“The big question we discussed beforehand is: Is everyone going to believe this is AI-driven?” Robbins said, adding that there is an aspect of AI that could be used to make general and administrative tasks more efficient using automation systems.
For Cisco, it is the second major wave of layoffs this year. The company announced in February that it would cut 5% of its workforce, or over 4,000 jobs. Before the first cuts, Cisco employed 84,900 people at the end of fiscal year 2023.
— CNBC's Michael Bloom and Ari Levy contributed to this report.
REGARD: Cisco CEO Chuck Robbins on fourth quarter results
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