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Sun, Mar 11, 2001 EST
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Cisco Systems to Slash 5,000 Jobs
By Matthew Fordahl   Associated Press
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SAN JOSE, Calif. — Cisco Systems Inc., the world's No. 1 maker of networking equipment, will trim its work force by up to 11 percent, or 5,000 positions, the company said Friday.

The cutbacks will be made mainly through attrition and will affect full-time salaried employees and temporary workers. The company previously announced it was cutting back on discretionary spending.

"We're taking these steps because of the continuing slowdown in the U.S. economy and initial signs of a slowdown expanding to other parts of the world," said John Chambers, Cisco's chief executive.

Cisco's stock price plunged to a 52-week low on the news, dropping $2, or nearly 9 percent, to $20.81 on the Nasdaq Stock Market. Last March, it closed at more than $80.

The announcement was the latest in a litany of warnings and cutbacks by Silicon Valley companies in recent weeks as they cope with a slowing economy, falling demand for computers and everything high-tech.

"Cisco probably has a closer handle on the current state of its business than any company in America," said William Becklean, an analyst at SunTrust Equitable Securities. "They're seeing weakness in demand like everyone else and they're taking action to protect their bottom line."

It's the third bad news announcement from a Silicon Valley giant this week alone.

On Thursday, No. 1 chipmaker Intel Corp. reported its first quarter will not meet expectations and it was slashing its payroll by 5,000 positions through attrition. On Wednesday, Yahoo! Inc. warned it would break even in its current quarter, badly missing analysts' expectations.

Sun Microsystems Inc., 3Com Corp. and JDS Uniphase Corp. also have issued warnings in recent weeks.

When Cisco executives reported earnings last month, they said the company was feeling the impact of the economic slowdown in the area of sales to the telecommunications industry. There was some hope at the time that the downturn would be quick.

"We also now believe that this slowdown in capital spending could extend beyond two quarters," Chambers said.

When Cisco announced its earnings, executives warned revenue could fall as much as 5 percent in the current quarter. That would be the first decline in its 11-year history as a public company.

The reduction in demand has been particularly felt in the routers, switches and other equipment it sells to telecommunications companies that make up the infrastructure of the Internet.

Cisco's work force has swelled from 8,800 employees in September 1996 to 44,000 this year after a series of acquisitions.

The job cuts announced Friday will affect up to 3,000 of the company's temporary and contract workers in addition to 3,000 to 5,000 regular employees.

Regular employee rolls will be reduced through voluntary attrition, involuntary attrition and consolidation. The reductions will occur over the remainder of fiscal 2001.

Cisco anticipates a one-time charge of up to $400 million by the end of the fourth quarter of its fiscal year.

Other expense reductions include cost cutting in discretionary spending such as contract services, travel and marketing expenses, the company said.

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