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Cisco loses $2.69 billion on declining sales

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Cisco Systems has posted a loss of $2.69 billion on its first ever quarterly decline in sales.

The networking equipment giant's sales were down 4.2 per cent in its third quarter at $4.93 billion compared to $4.73 billion in the same quarter last year.

Cisco's pro forma net income for the quarter was $230 million but restructuring charges associated with its recent layoffs of $1.17 billion and an excess inventory charge of $2.2 billion took it well into the red.

"The first four months of 2001 were extremely challenging as we went from year over-year bookings in excess of 70 per cent in November, to 30 per cent negative growth within a span of several months. This may be the fastest deceleration any company of our size has ever experienced," said John Chambers, Cisco's chief executive.

In a conference call, Chambers repeated earlier projection that its fourth quarter sales would be flat or down 10 per cent on those it recorded this quarter.

Weak demand for networking kit as the US economy has slowed and reorganisation among US service providers, a key market for Cisco's high-end routers, has hit its revenues far more than it ever expected. Bankruptcies among startup phone and Internet companies mean that the percentage of Cisco's sales in the US for the quarter is down from 49 per cent to 41 per cent.

Demand in the key markets of the UK, Germany and Japan has also been weak.

Other major players in the networking market, such as Nortel and Lucent, have also been forced to make lay offs recently as their sales have declined for similar reasons. Industry watchers predict that Cisco is better positioned for recovery and that we might its recent disappointing financial performance might have bottomed out.

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