Business World

Thursday 18 September 2014

Cisco to cut another 6,000 jobs as forecast falls flat

Published 14/08/2014 | 07:57

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Cisco
Cisco

Cisco Systems forecast tepid current-quarter results and said it plans to cut another 6,000 jobs, as the network equipment maker works through a transition toward a new cycle of high-end switches and routers.

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The latest round of layoffs is at least the third workforce reduction in about as many years for a company once synonymous with the Internet boom, but which has lately struggled to sustain growth.

The company announced in August 2013 that it would cut 4,000 jobs. And in 2011, it said it planned to reduce its workforce by more than 11,000.

Shares in the company slipped 0.95 percent to $24.96 in extended trading, from a $25.20 close on the Nasdaq.

“The market doesn’t wait for anyone. We are going to lead it, period," Chief Executive Officer John Chambers told analysts on a conference call. "The ability to do that requires some tough decisions. We will manage our costs aggressively and drive efficiencies.”

Chambers partly blamed the cuts on the uncertainty in global demand. In emerging markets, where the company faces sluggish sales and increased competition, Cisco saw continued challenges. China product orders fell 23 percent, and Brazil had 13 percent declines.

"Unfortunately, as we look out, we don’t see emerging markets growth returning for several quarters and believe it could get worse," said Chambers.

Total product orders rose 1 percent, with 2 percent growth in both the Americas and Europe, the Middle East and Africa, offset by a 7 percent decline in Asia and Pacific.

"The mixed quarter has become the norm for Cisco," said Zeus Kerravalla at ZK research. "As the market transitions, your staff has to transition. I see a lot of what they are doing as a reallocation and I think it is the right thing for the company."

Cisco's high-end routers and switches declined 7 percent and 4 percent year-over-year, respectively, as customers were slow to order a new series of products. Its data center revenues rose 30 percent, and security sector revenues rose 29 percent.

Security revenue was boosted by the acquisition of SourceFire, a cyber security firm Cisco acquired in October 2013.

Cisco also forecast earnings per share of between 51 cents and 53 cents for its current, fiscal first quarter. It predicted flat to 1 percent growth in revenue for the period.

Cisco posted a smaller-than-expected 0.5 percent dip in fiscal fourth-quarter revenue to $12.4 billion. Wall Street on average had expected $12.1 billion, according to Thomson Reuters I/B/E/S.

That beat the company's previous guidance for a decline in revenue of between 1 percent and 3 percent for the quarter.

Cisco reported a net profit of $2.8 billion in the fiscal fourth quarter, flat from the year-ago quarter and adjusted earnings of 55 cents per share. That exceeded the consensus forecast of 53 cents.

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