Cisco Systems Inc, the world’s largest maker of computer networking gear, said on Wednesday that it is set to eliminate thousands of jobs as part of cost-cutting moves to get profits growing again.
Cisco’s sales rebounded from the recession, but then started stalling in the middle of last year. In the past few months, chief executive John Chambers has signaled that he’s accepting long-standing criticism that the company is trying to compete in too many markets. He has vowed to radically simplify the firm.
The company remains in trouble and on Wednesday, it gave a financial forecast for the current quarter that was well below analysts’ expectations.
Chambers wants to cut annual expenses by US$1 billion, or about 6 percent. He did not say how many jobs he is aiming to eliminate, mainly through an early retirement program, but if the percentage is similar to the cut in expenses, it could amount to between 4,000 and 5,000 of the company’s 73,400 employees.
Cisco last embarked on a belt-tightening program two years ago in the depths of the recession. The goal then was also to shave US$1 billion of annual expenses, which it did by cutting travel, freezing hiring and instituting a similar early retirement program. The company lost 2,000 employees before it started hiring again.
This time, the cost cuts are meant to address long-term challenges, not a short dip in the economy.
The company may also sell or close under-performing units, Chambers said, much like a month ago when it announced it was killing the Flip Video camcorder, a product line it bought just two years earlier. The move was part of a partial pullback from the consumer market, which Cisco has tried to court for years.
Another problem area is network switches, Cisco’s largest single product segment, where competition is quickly driving down prices. The firm’s revenue from the segment fell 9 percent in the first quarter.
The company is introducing new products quickly to fight back, Chambers said.
“We know what we have to do. We have a clear game plan,” he told analysts on a conference call. “We’ve had to make big changes before, and each time we’ve made these changes, we’ve emerged even stronger.”
For the fiscal third quarter, which ended on April 30, Cisco said net income declined nearly 18 percent to US$1.8 billion, or US$0.33 a share. Sales rose 5 percent to US$10.9 billion, matching analyst expectations.
For the current quarter, Cisco expects earnings of US$0.37 to US$0.39 a share, while analysts were expecting US$0.42 a share. The company expects revenue to be unchanged from last year or up to 2 percent higher, while analysts were looking for a 7 percent increase.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is