Cisco cutting 4,000 jobs, CEO sees 'slow' progress

Wed Aug 14, 2013 6:20pm EDT

A sign marking a Cisco office is pictured in San Diego, California November 12, 2012. REUTERS/Mike Blake

A sign marking a Cisco office is pictured in San Diego, California November 12, 2012.

Credit: Reuters/Mike Blake

(Reuters) - Network equipment maker Cisco Systems Inc is cutting 4,000 jobs, or 5 percent of its workforce, as it makes a fresh attempt to reduce costs and refocus on growth areas as it faces uncertain demand for its networking equipment.

"The environment in terms of our business is improving slightly but nowhere near the pace that we want," said Chief Executive John Chambers on a conference call following its quarterly earnings.

Shares of the world's biggest network equipment maker fell more than 9 percent after hours, which would be its biggest dip in more than a year if reflected on Nasdaq on Thursday.

The company's shares had been up more than 50 percent in the past 12 months, as investors were heartened by signs that Cisco would be able to ride the stuttering demand for tech infrastructure.

"It's just not growing at the speed we want," Chambers said of the current business environment. "We have to very quickly reallocate the resources."

Chambers said that means cutting some staff, and moving others on to areas growing the quickest, such as datacenters, cloud computing, mobile and software markets.

His commentary on the global corporate IT environment is closely watched by investors, as Cisco is regarded a strong indicator of the general health of the technology industry because of its broad customer base.

Shares of Microsoft Corp, Oracle Corp, IBM and Hewlett-Packard Co were all down slightly after hours.

Cisco has been whittling away at its workforce for some time. Two years ago it started a plan to cut expenses by $1 billion, including a 15 percent reduction to its workforce. The latest cuts mark a new wave of job reductions.

EARNINGS FORECAST MODEST

Cisco forecast 3 percent to 5 percent revenue growth this quarter, toward the low end of expectations, as it continues to grapple with an uncertain global IT spending environment.

Executives also forecast on Wednesday earnings-per-share of 50 cents to 51 cents in its fiscal current quarter. Earlier, Cisco reported fiscal fourth-quarter revenue in line with Wall Street expectations.

The company's forecast for current-quarter revenue growth translated into a range of $12.2 billion to $12.5 billion. Analysts on average had expected $12.5 billion.

Cisco had a net profit of $2.3 billion, or 42 cents per share, in the fourth quarter. That compared with a profit of $1.9 billion, or 36 cents per share, in the year-ago quarter.

Revenue rose 6 percent to $12.4 billion, matching analysts' expectations, according to Thomson Reuters I/B/E/S.

Excluding some items, the company reported profit of 52 cents per share, which was a penny better than analysts' average estimate.

The results were in line with the company's forecasts three months ago, based on what it called "encouraging" signs.

(Reporting by Bill Rigby, Editing by Bernard Orr)

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