Cisco's plan to turn itself around took a big chunk out of profits in its fourth fiscal quarter, and the company warned investors that the shaky state of the global economy could affect its business in the coming months.
The company said yesterday its net income dropped 36 percent to $1.2 billion over last year after it got hit by $768 million in restructuring charges. Sales rose about 3 percent to $11.2 billion. Cisco is in the midst of shifting its focus away from non-core businesses toward its traditional router and switching units.
The company has also taken dramatic steps to take $1 billion off its annual expenses for the 2012 fiscal year. The company shuttered its Flip camera business in April and announced last month it would cut 6,500 employees and sell one of its factories to Chinese manufacturer Foxconn.
"We do not underestimate the transitions in front of us or the importance to rapidly simplify our organization to deal with the many challenges facing us," Cisco CEO John Chambers said in a conference call with analysts.
Cisco dampened expectations for the upcoming quarter on concerns about the global economy. Sales are expected to grow at a meager pace for the company's first fiscal quarter, with Cisco estimating revenue growth to be in the range of 1 percent to 4 percent over last year.
"We all see the uncertainty in the global markets, and the last several weeks have obviously been extremely challenging from the stock market perspective," Chambers said, adding the company would be "conservative on our expectations" for the first quarter and next year.
Investors reacted positively to Cisco's results despite the company's somber outlook, and the company's stock rose 17 percent by 10:45 a.m. Eastern trading on NASDAQ.