Cisco layoffs, shares slide
Cisco (NASDAQ:CSCO) traded sharply lower following the company’s seemingly strong fourth quarter results on Wednesday. Shares were down by more than 10% in early pre-market trading as the company announced it would be laying of a substantial portion of its workforce to improve profitability. The company will be laying off 4,000 workers, roughly 5% of the workforce, as part of a continued restructuring plan.
The news of the layoffs came after Cisco reported a fiscal fourth quarter that beat analysts’ expectations on both the top and bottom lines. The better than anticipated results were powered by continued strength in its enterprise business. Net income rose to $2.27 billion, or $0.42 per share, from $1.92 billion, or $0.36 per share, in the fourth quarter of last year. Revenue climbed 6.2% to $12.42 billion from $11.69 billion. Analysts had predicted earnings of $0.51 per share on revenue of $12.41 billion. Gross margins for the quarter dropped to 59.2% from 60.6% a year ago. Going forward, the company guided 3% to 5% growth in the fiscal first quarter, in line with analyst predictions.
These results come after the incredible run in shares already this year. Year to date shares are up more than 33% as the street has regained its love for the once hated company. The company has reshaped itself over the last year by focusing its attention on its high growth areas. Cisco has worked to leverage its networking skills in an attempt to gain market share in a broader range of products and services. In the coming quarters increased attention will be placed on monetizing mobile, cloud computing and video communications.
At the time of this writing shares traded at $24.13, below the 50 day moving average at $25.54. Traders will be watching the 200 day moving average at $22.80 as the next level of support. Over the coming week we should expect to see a number of analysts recommendations, many of which may be valuation based.
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