Needless to say, after the announcement, Cisco’s shares fell in after-hours trading after the company predicted a steeper-than-expected drop in sales and lower-than-predicted profits for the current quarter. Revenues are estimated to decline by 4 to 6 percent year-over-year for its fourth quarter.
San Jose, California-based Cisco Systems sells routers, switches, software and services to businesses. But with more and more corporate customers relying on remote data centers for their computing needs, instead of online networks maintained on-site, Cisco’s business has been hurt.
Adding to the company’s woes, Kelly Kramer, Cisco’s chief financial officer spoke with Market Watch in a telephone interview pointing out that Cisco’s large business dealings with the federal government, while maybe worth about 1.0 percent of the four to six percent sales decline projected for the fourth quarter, were still “dramatic.”
President Trump’s promise to cut federal spending has created uncertainty in many federal agencies and departments because no one knows yet how much they will have to spend in the new 2018 budget coming out in September. There are also some worries over sales in Mexico. Sales there were down 49 percent year-over-year, said Cisco chief executive Chuck Robbins
President Trump’s unpredictability and interactions with foreign leaders have begun to worry many investors. As a matter of fact, the sharp decline in the Dow Jones Industrial Average (DJIA) on Wednesday is being blamed on Trump, who the day before was accused of asking former FBI Director Comey to drop the investigation of Michael Flynn.
The company also announced they were expanding the number of employees that would be affected by the restructuring plan initially announced in August, according to the Associated Press. Instead of 5,500 employees being laid off, an additional 1,100 more have been added to the roll.
Cisco’s stock was down $2.53, or 7.5 percent, to $31.29 after extended trading. Profits came to 50 cents a share for the fiscal third quarter. For the current quarter, analysts anticipate share profits of 60 to 62 cents per share.
