Cisco Confirms Major Jobs Cull, Despite Profit Growth

Networking giant Cisco has confirmed reports that it will restructure its business to continue its focus on “security, IoT, collaboration, next generation data centre and cloud.”

This is despite the fact that Cisco reported a healthy rise in profits for both its full year and quarterly results.

Cost Base Optimisation

Earlier this week reports suggested Cisco was considering the single biggest round of job cuts in its history, with plans to cull between 9,000 and 14,000 staff, or about 20 percent of its global workforce.

And now Cisco has confirmed the ‘restructuring’ of the company, but said that it would only cut 7 percent of its workforce, or 5,500 jobs.

The networking giant had 73,104 staff as of 20 April.

“Today’s market requires Cisco and our customers to be decisive, move with greater speed and drive more innovation than we’ve seen in our history,” said Cisco in a statement. “Today, we announced a restructuring enabling us to optimise our cost base in lower growth areas of our portfolio and further invest in key priority areas such as security, IoT, collaboration, next generation data centre and cloud.”

It said any cost savings from these reductions would be plowed back into the above businesses, and that the company would “continue to aggressively invest to focus on our areas of future growth.”

Cisco has regularly trimmed its workforce. In August 2014 it axed 6,000 jobs, and prior to that 4,000 jobs were lost in August 2013, and 1,300 in July 2012 and 6,500 in July 2011.

Cisco announced no cuts last summer, which coincided with Chuck Robbins taking the role of chief executive in July.

It seems that the job cuts were not unexpected, after industry analysts predicted the move because of Cisco’s move toward selling more software and cloud-based services, including security products, which require fewer back-end staff.

Cisco of course is having to contend with sluggish demand for its traditional switches and routers from telecom carriers and enterprise customers, as well intense competition from the likes of Huawei and Juniper Networks.

“We had another strong quarter, wrapping up a great year,” said CEO Chuck Robbins. “I am particularly pleased with our performance in priority areas including security, data centre switching, collaboration, services as well as our overall performance.”

“We continue to execute well in a challenging macro environment,” he said. “Our product deferred revenue from software and subscriptions grew 33 percent showing the continued momentum of our business model transformation.”

Hugely Profitable

But staff affected by the restructuring will no doubt be annoyed at the loss of their jobs and the upbeat statement from Robbins, considering Cisco has reported a very healthy rise in its net profits.

For the fourth quarter Cisco posted a 21 percent rise in profits to $2.8bn (£2.1bn) from $2.3bn (£1.7bn) in the same year-ago quarter. Revenues however declined 2 percent to $12.6bn (£9.6bn) from $12.8bn (£9.7bn) a year ago.

For the full year the networking giant posted an impressive 20 percent rise in profits to $10.7bn (£8.1bn) from $9bn (£6.8bn) in the previous financial year.

Revenues on a year basis were flat at $49.2bn (£37.4bn).

And the company is still spending. In June for example Cisco beefed up its security offerings with the purchase of CloudLock, a cloud-based security provider, for $293 million (£219m) in cash and stock.

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