Cisco warns of lower earnings

'Difficult business decisions': Cisco's John Chambers

Silicon Valley's largest company, Cisco Systems, issued a profits warning after Wall Street closed on Monday.

The tech giant, the worldwide leader in networking for the internet, said that sales for the third quarter would come in 30% lower than the previous three months.

This may be the fastest any industry our size has ever decelerated

John Chambers, Cisco chief executive

The firm also announced plans to layoff 8,500 people, about 1,000 more than it previously said last month.

The company said that the business environment had "never been more challenging".

Sales for the third quarter would be down about 30% from the second, when they reached $6.7bn (£4.66bn).

The company said it expected its sales for the fourth quarter to range from flat to a fall of 10%.

Cisco blamed "global economic challenges, the slowdown in the global telecom market and the deceleration in corporate information technology spending" for its troubles.

"This may be the fastest any industry our size has ever decelerated, which has required us to make difficult business decisions at unprecedented speed," said Cisco chief executive John Chambers.

Industry slowdown

High tech stocks have plunged in recent months because of the slowdown in the US economy and a slump in spending by firms on information technology.

Lucent Technologies, Nortel Networks and Cisco's other rivals have all either announced huge job cuts or have issued profits warnings.

And more are expected this week, with a slew of firms reporting earnings.

"My real concern is not about Cisco," said one analyst.

"Relatively speaking, the company will do well, but if relatively well is having revenue difficulties to this order of magnitude, then it is troubling for the industry".

Cisco shares were reaching $15.90 in after hours trading on Monday, having closed on the Nasdaq at $17.20, where they had dropped 78 cents, or more than 4%.

The stocks have plunged from a year high of nearly $72.