Cisco Systems, the network systems manufacturer, has slowly but surely fallen on harder economic times. According to an earnings call led by Cisco CEO John Chambers, the company plans to cut its workforce by at least 4,000, which comes on top of another several thousand in the past 18 months. He cited poor sales in Asia, lingering progress in European markets and an overall global slowdown that threatens its bottom line. Calling it a "workforce rebalancing," what Cisco is really doing is signaling to the market that troubled waters may lie ahead.
Testosterone Pit, an independent finance blog penned by Wolf Richter, explored Cisco's plights in a post this week. Richter highlighted the fact that, given Cisco's position as a tech leader, developments in the business are a fair bellwether for investors that value careful risk determinations over gut feelings.
Chambers seemed troubled by a "slower and more inconsistent" recovery in the world economy. The downturn has been especially hard on tech companies, which have been forced to put upgrades on hold until revenues improve. As a result, services from firms like Cisco aren't in as much demand. During the call, Chambers expressed hope that the layoffs would put the company on a more agile path forward.
"The environment in terms of our business is improving slightly but nowhere near the pace that we want," he said. "We have to very quickly reallocate the resources."
How have these developments affected Cisco's stock price? According to the SmartStops Risk Signals, [CSCO] entered an Elevated risk state in the market soon after the earnings call. Its per-share price has fallen by $0.77 since the announcement.
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