Cisco Systems Inc. is cutting 6,000 jobs — about 8 per cent of its staff — after releasing results that in its fourth quarter the company had US$12.4 billion in revenue, essentially the same as it did for the same period a year ago.
For the three-month period ending July 26 it had profit of US$2.2 billion. For the fiscal year revenue was US$47.1 billion, down US$1.5 billion compared to the 12 month period a year ago. Profit for the year just ended was US$7.9 billion, compared to $10 billion a year ago.
But Zeus Kerravala, an industry analyst with ZK Research, noted in an interview that in a conference call with financial analysts CEO John Chambers was careful to called the layoffs a “limited restructuring.” Chambers said about 2,000 of those let go will be re-hired into new positions, Kerravala noted.
Chambers said the savings will be directed into specific areas such as data centre, security, cloud and software. Kerravala suspects most of them will be in areas related to the so-called Internet of Things products and services Cisco [Nasdaq: CSCO] is increasingly offering.
Cisco Canada has about 1,600 employees. A company spokesman had no comment on whether staff here will be affected.
Computerworld U.S. noted that during the latest quarter sales of software and Unified Computing System (UCS) combined data-centre server/networking/storage systems were up 29 per cent and 30 per cent respectively. On the other hand sales of routers and switches dropped.
In a conference call with financial analysts, Chambers noted that in 2011 he began what he called a transformation of the company from selling boxes of switches to selling “integrated architectures, solutions and outcomes.” Operationally the company has done a good job against those objectives, he said, affording Cisco flexibility as it goes after new business.
Still, he said, there now has to be a “limited restructuring” to continue the transformation. Revenues for the current quarter will be flat or up only 1 per cent, he said. He assumes there will be weakness in the next several quarters, and not expecting a rebound soon in emerging markets.
The restructuring is aimed “investing in growth, innovation and talent, while managing costs and driving efficiencies.”
SiliconValley.com noted that in the past three years Cisco has laid off over 10,000 employees, and while overall head count dropped to 66,600 in 2011, it will be at 74,000 after the current layoffs.
Asked by an analyst why the layoffs are coming now, Chambers cited “uncertainties in the market. You are seeing a few headwinds, and a lot of tailwinds. The pace of change is accelerating. We felt we had to move with tremendous speed on it. We are going to put these investments into our growth areas, such as cloud, software, security.”
One problem is that it isn’t easy to move a Cisco staffer with expertise in one area to a new country where sales are increasing, Chambers said, or to a different division.
But, he added, “if we’re going to become the number one IT player our ability to move requires decisiveness and requires investing in these growth (areas).” And while he insisted Cisco has made advances in new products “we think we have to move even more rapidly and get these (internal) groups co-ordinated so we focus the whole company horizontally on getting business outcomes.”