More bad news from Silicon Valley followed hard on the heels yesterday of the announcement from Cisco Systems that its unbroken run of 11 years of greater sales and bigger profits had ended. National Semiconductor and Exodus Communications forecast big job losses amid steep drops in sales.
By suffering its first-ever loss, Cisco has underlined how much the New Economy has faltered since the bursting of the Nasdaq bubble. As the leading world provider of the routers and switches that run the Internet, Cisco has been hard hit by the slowdown.
Dot.com failures bit into sales, as orders for Cisco's equipment dried up. Telecommunications companies also slowed planned purchases of advanced networks and big corporations cut spending or purchased equipment second hand from bankrupt tech companies. In March last year, Cisco was the world's most valuable company. Today it is laying off 8,500 workers and its market valuation has fallen from $560 billion (#633 billion) to about $110 billion.
Chief executive Mr John Chambers hinted that some of Cisco's businesses might be bottoming out and that longterm prospects remained healthy, but he warned that revenues for the next quarter are expected to stay steady or drop 10 per cent. Cisco shares, 60 per cent down this year, fell as the news of its losses sent the Nasdaq plunging yesterday, though the tech-heavy index recovered in later trading.
National Semiconductor saw its shares dip 2 per cent in early trading after the chip maker sharply lowered its outlook for the current quarter and said it would cut 1,100 jobs, or 10 per cent of its workforce. National Semiconductor said it expected revenue of $390 million to $400 million, down as much as 18 per cent from the third quarter.
Web hosting company Exodus Communications said yesterday it would shed about 15 per cent of its workforce, or about 675 jobs, as it tries to control costs amid steep losses and the fall-off in technology spending by businesses.
Exodus warned of the job cuts in April, when it reported a first-quarter net loss of $650 million, up almost 10-fold from a year earlier.
