Cisco shares fall on five-day U.S., Canada shutdown

NEW YORK (Reuters) - Cisco Systems Inc (CSCO.O) said it will close most of its U.S. and Canada operations for five days to cut costs, sparking fears that demand for its products was weaker than expected, and sending its shares down almost 6 percent.

The shutdown from December 29 through January 2 is part of Cisco's previously announced plan to cut costs by over a $1 billion in fiscal 2009, spokesman Terry Alberstein said on Tuesday. The move excludes critical parts of the business such as technical assistance and customer order services.

While Cisco did not say how many employees would be affected, RBC Capital analyst Mark Sue estimated that about 60 percent of the network equipment maker's workers are in North America.

"It does highlight the fact that we're in for a long period of recovery. Demand is not snapping back, which is why companies such as Cisco are reverting to what they do best, which is controlling the controllable," Sue said.

Cisco, seen as a bellwether for the technology sector, warned on November 5 that revenue could fall as much as 10 percent in the current quarter as the economic downturn spreads from the United States to Europe and Asia. It announced the cost-savings target at the same time.

Earlier on Tuesday, UBS analyst Nikos Theodosopoulos said in a research note that Cisco was planning a four-day shutdown.

"We believe it is prudent for Cisco's management team to plan for cushion in the event of weaker-than-expected revenues," said Theodosopoulos.

The analyst also said he thought Cisco was likely aiming for more than the planned $1 billion in cost cuts.

Cisco's Alberstein declined to comment beyond his written statement.

Cisco shares were down 85 cents or 5 percent at $15.55 on Nasdaq, underperforming the Nasdaq Composite index .IXIC, which was down 1.93 percent. Cisco shares have fallen more than 40 percent from the start of 2008.

(Reporting by Sinead Carew; Editing by Brian Moss and Derek Caney)