Cisco To Axe 4,000 Staff Despite Positive Results

Cisco Systems is to axe 5 percent of its workforce, or 4,000 staff, in the next 12 months as part of an impending restructuring.

The networking giant revealed the fresh round of redundancies during its quarterly earnings call on 14 August.

Cost Cutting

However it is clear that the latest layoff news was not dictated by its current income or profitability numbers.

The San Jose, California-based networking giant’s profit beat Wall Street estimates by improving to $2.27 billion (£1.5bn) or 42 cents (£0.27) per share, from $1.92 billion (£1.2bn) or 36 cents (£0.23) per share in the same year ago quarter.

Revenue meanwhile rose a healthy 6.2 percent to $12.42 billion (£8bn) from $11.69 billion (£7.5bn), also exceeding expectations.

Nonetheless, the stock price skidded more than 9 percent to $26.38 (£17) at one point in after-hours trading. The company said it will take a charge against earnings for corporate restructuring in the fiscal first quarter.

Cisco CEO John Chambers, on a conference call to analysts and journalists, said the company needs to make a fresh attempt to reduce costs and refocus on new growth areas, because it is seeing uncertain demand for its networking equipment.

Uncertain Demand

The company already owns more than 75 percent of the Internet networking equipment market, mainly in switches, routers and servers and accompanying services.

“The environment in terms of our business is improving slightly but nowhere near the pace that we want,” Chambers said. “It’s just not growing at the speed we want. We have to very quickly reallocate the resources.”

Chambers said Cisco will let some staff people go and move others to fast-growing divisions, such as cloud computing, data centres and mobile software markets. Yahoo Finance currently lists Cisco as having 66,639 full-time employees.

Layoffs in the past few years are nothing new for Cisco. A year ago, the company announced it was cutting 1,300 workers. In 2011, Chambers revealed a plan to cut expenses by $1 billion (£644m), which included a 15 percent reduction to its workforce. In 2009, it let 700 workers go for various reasons.

Cisco has been rechanneling its networking expertise into a set of newer products and services, specifically in mobile, cloud-computing and video. Prior to 14 August, the stock had been up nearly 25 percent in the last three months.

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Originally published on eWeek.