Cisco Warns Of 6,000 Job Cuts As Results Disappoint

Cisco is to cut 8 percent of its workforce, as the company’s transformation into an IT solution provider stutters in the face of growth challenges.

The news that yet more jobs will be axed will be devastating news for the Cisco workforce that has already faced large scale layoffs at the networking giant in the past three years.

Growth Struggle

The job cuts comes amid ongoing disappointing results at the networking giant as it struggles to cope with declines in emerging markets such as China, Brazil, Russia, Mexico and Africa. Cisco is also facing declining demand for low-end networking equipment, and intense competition from the likes of Huawei Technologies, Juniper Networks and Alcatel-Lucent.

For fourth quarter ending 26 July Cisco posted a stagnant net profit of $2.3 billion (£1.3bn) when compared to the $2.3 billion (£1.4bn) profit in the same year-ago quarter. Sales were likewise flat at $12.4 billion (£7.4bn), compared to $12.4 billion (£7.4bn) in revenues a year ago.

But the bigger picture can be seen when the full year results are examined.

For the full year 2014, Cisco posted a net profit of $7.8 billion (£4.7bn), well down from a net profit of $9.9 billion (£6bn) in the previous year. Revenues likewise declined to $47.1 billion (£28.3bn) for FY2014, down from $48.6 billion (£29.1bn) for the previous year.

These declines come despite very aggressive cost cutting at the company over the past three years. In August 2013, Cisco announced it was cutting 4,000 jobs, in 2012 it laid off 1,300 workers and in 2011, Cisco axed 15 percent (or 6,500 jobs) from its workforce. In 2009, it let 700 workers go for various reasons.

Ongoing Transformation

Cisco has been struggling to adapt to a changing industry that has witnessed the arrival of cloud computing, big data and mobile computing. Cisco is pinning its colours to the Internet of things (IoT) and software-defined networking (SDN) trends going forward, as CEO John Chambers feels those areas offer the best growth prospects.

During a conference call, Chambers reportedly said Cisco will use the savings from the job cuts to invest in such areas as the cloud, software and services. However, he failed to give a timeline for when the job cuts would happen, or what units will bear the brunt of the job losses.

“We will exit this year pretty much with the same number of people we started the year with,” he was quoted by the WSJ as saying. “Some groups will not be affected at all. Others will.”

Yet despite the job cuts, Chambers said he was pleased with Cisco’s progress.

“We are executing well in a tough environment and delivered our best non-GAAP earnings per share quarter in our history,” said Chambers in a statement. “I’m pleased with how we are transforming our company over the past several years and that journey continues.”

“We are focused on growth, innovation and talent, especially in the areas of security, data centre, software, cloud and internet of everything,” Chambers added. “Our strategy is sound, our financials are strong, and our market leadership is secure. We have the team in place to deliver and are uniquely positioned to help our customers solve their biggest business problems.”

Do you know the secrets of Cisco? Take our quiz!