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

Wed Aug 13, 2014 6:28pm EDT

A Cisco logo is seen at its customer briefing centre in Beijing, November 14, 2013. REUTERS/Kim Kyung-Hoon

A Cisco logo is seen at its customer briefing centre in Beijing, November 14, 2013.

Credit: Reuters/Kim Kyung-Hoon

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(Reuters) - Cisco Systems Inc (CSCO.O) 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.

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.

(Reporting by Marina Lopes; Editing by Jonathan Oatis)

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Comments (6)
SoutherRican wrote:
The good news is that the workers in their U.S. facilities are probably Guest workers from other countries that should return to where they came from. The bad news is the they will just be hired by other U.S. employers as a for form of Cheap Labor. But it is the Mexican uneducated migrant farm worker that is killing U.S. jobs, yea right. What we do forget is whom harvest U.S. crops when many in the U.S. where fighting World War2, if you guessed the Crop Harvest Fairy, your wrong.

Aug 13, 2014 6:17pm EDT  --  Report as abuse
GeorgeBrown wrote:
Ah, Cisco, another corporate “job creator”! We should lower the corporate tax rate in order to create more jobs…oh, wait…we already tried that…

Aug 13, 2014 8:41pm EDT  --  Report as abuse
JustProduce wrote:
GeorgeBrown
If we tried to reduce taxes, we did a poor job. There are many places that treat capital better than the US. Adjusted to economic activity (GDP) we tax corporations more than even countries like Norway.

Aug 13, 2014 11:48pm EDT  --  Report as abuse
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