Cisco cuts 4,000 jobs as demand falters

NIMBLER RIVALS::Networking giant Cisco has been losing ground since 2010 to competition in the form of the more agile Juniper Networks and Palo Alto Networks


Fri, Aug 16, 2013 - Page 15

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 in the face of uncertain demand for its networking equipment.

Shares of the world’s biggest network equipment maker fell more than 9 percent after hours, their biggest drop in more than a year, if reflected on the NASDAQ yesterday.

A lukewarm revenue forecast dashed expectations that Cisco could overcome muted demand for technology infrastructure. Its shares had been up more than 50 percent in the past 12 months.

Cisco has been whittling away at its workforce and selling off consumer businesses, such as home networking, in a turnaround begun in 2010, when it started losing ground to nimbler rivals like Juniper Networks and Palo Alto Networks.

The company that once specialized in providing the backbone of the Internet now sees software and equipment for datacenters and corporate cloud networking as its keys to growth.

However, Wednesday’s results suggest the pace of expansion has been slower than anticipated, analysts said.

“The environment in terms of our business is improving slightly, but nowhere near the pace that we want,” chief executive John Chambers said on a conference call following quarterly earnings.

“We have to very quickly reallocate the resources,” he said.

Cisco said last month it plans to buy cybersecurity company Sourcefire Inc for US$2.7 billion.

The company has made it a priority to improve security across its hardware, software and cloud products.

Chambers also said the current business environment was underperforming his expectations.

Despite strength in the US, weakness in Asia and mixed results from Europe continued to dog its business.

The Cisco CEO’s take on the global corporate technology 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.

Cisco forecast between 3 percent and 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 US$0.5 to US$0.51 in its current fiscal quarter.

Earlier, Cisco reported fiscal fourth-quarter revenue in line with Wall Street expectations.

The company’s revenue forecast for the current quarter translated into a range of US$12.2 billion to US$12.5 billion.

Analysts on average had expected US$12.5 billion.

Cisco had a net profit of US$2.3 billion, or US$0.42 per share, in the fourth quarter. That compared with a profit of US$1.9 billion, or US$0.36 per share, in the year-ago quarter.

Revenue rose 6 percent to US$12.4 billion, matching analysts’ expectations, according to Thomson Reuters.

Excluding some items, the company reported profit of US$0.52 per share, which was slightly better than average estimates according to analysts.