Cisco to slash 5,500 jobs
Blames ‘challenging’ quarter,
Cisco Systems, SAN FRANCIS CO the computer-networking giant that is in the midst of a major technological pivot, on Wednesday said it will eliminate up to 5,500 jobs.
It is Cisco’s second major job reduction in two years. The San Jose-based company laid off 6,000 in a restructuring in 2014.
The Silicon Valley company announced the cuts — about 7% of its global workforce — during its fiscal fourth-quarter earnings report. Sluggish spending by corporations and telecom carriers on network switches and routers, Cisco’s big moneymakers, have prompted it to shake up staff ranks as it turns toward other fields, such as cloud computing.
The news sent Cisco shares down 1%, to $30.36, in afterhours trading.
Cisco slightly beat analysts’ estimates with a quarterly profit of $2.8 billion, or 56 cents a share, on revenue of $12.64 billion. Adjusted profits would have been 63 cents. Analysts surveyed by FactSet predicted adjusted earnings of 60 cents a share on revenue of $12.57 billion.
Cisco CEO Chuck Robbins deemed the quarter a “challenging environment with volatility” in a conference call Wednesday. He said Cisco would increase in- vestments in growth areas.
Like fellow tech behemoths Oracle and IBM, Cisco finds itself wrenching toward a shift of business to fledgling markets such as cloud computing and the Internet of Things. And, like them, it has scooped up companies specializing in those technologies: In February, Cisco announced plans to acquire Internet of Things company Jasper Technologies for $1.4 billion.
Intel, another venerable tech giant trying to maneuver an evershifting climate, in April said it would slash up to 12,000 jobs, or 11% of its worldwide workforce.
“A big pivot is reasonable,” IDC analyst Rohit Mehra says. “Cisco’s bread-and-butter business, switching and-routing business, isn’t going away but it has slowed, as has wireless LAN. They need to do something new.”
Cisco’s headcount reduction isn’t “necessarily a negative for Cisco’s share price performance,” analysts for global banking investment firm Jefferies said in a note today, maintaining a “buy” rating on Cisco stock.
“Naturally, any headcount reduction could be viewed as a sign of weakness in business fundamentals,” the note said. “We believe any headcount reduction at Cisco — at this point — would be driven by their natural re-organization of the business.”