SAN JOSE, Calif. (AP) – Networking giant Cisco Systems Inc. warned Monday that third-quarter earnings and revenue will fall far short of forecasts amid decreasing demand and increasing inventory backlogs.

The company said it expects earnings per share to be in the ”very low, single-digit range.” Analysts surveyed by Thomson Financial/First Call were expecting 8 cents per share.

The San Jose-based company also said it expects third-quarter revenue to be 30 percent below the company’s second-quarter sales of $6.7 billion, or about $4.7 billion.

It would be the first time in Cisco’s 11-year history as a public company where revenues fell from quarter to quarter. In the year-ago third quarter, Cisco had $4.9 billion in revenue.

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

Earlier this year, Cisco executives estimated revenues to range from flat to a drop-off of 10 percent. Officials also hinted at a more substantial decline in recent speeches and conferences.

Cisco also said it planned to cut about 8,500 jobs, about 1,000 more than it said last month. The job cuts include 2,500 temporary and contract workers.

Cisco will take a one-time charge of $800 million to $1.2 billion for restructuring, including $300 million to $400 million as a result of the job cuts.

The slowdown in spending by Cisco’s customers also has resulted in a large excess of inventory, Chambers said. That’s in stark contrast to a year ago, when Cisco could not keep up with its customers’ demands.

”When the demand dropped off so dramatically in this calendar year, what might have normally been four months’ supply quickly evolved in many of our product areas to an excess of 12 months’ supply,” he said.

The company expects to take an excess inventory charge of about $2.5 billion during its fiscal third quarter.

Analysts were expecting a warning, given negative comments made by company officials during interviews and meetings in recent weeks.

”The surprising thing here was the magnitude of their inventory write-off,” said Richard Shannon, an associate analyst at Epoch Partners.

Investors weren’t pleased, sending shares down 7.7 percent to $15.87 in after-hours trading, after they finished at $17.20, down 78 cents, in regular trading on the Nasdaq Stock Market.

The outlook for the fourth quarter also appeared dim. Chambers said revenue will range from flat to down 10 percent compared with the third quarter.

”This is not the only disappointment we’re going to see,” said Paul Sagawa of Sanford Bernstein. ”I don’t see any good news from this earnings season.”

Sagawa said he does not see anything jump-starting sales over the next several quarters. Stock rallies, he added, cannot be sustained without some positive news from the companies.

”It’s probably going to be really bad through mid-2002,” he said. ”That’s the reality people are going to have to chew on.”

Cisco is scheduled to release its full third-quarter earnings report May 8.

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