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.
ADVANCED: Previously, Taiwanese chip companies were restricted from building overseas fabs with technology less than two generations behind domestic factories Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), a major chip supplier to Nvidia Corp, would no longer be restricted from investing in next-generation 2-nanometer chip production in the US, the Ministry of Economic Affairs said yesterday. However, the ministry added that the world’s biggest contract chipmaker would not be making any reckless decisions, given the weight of its up to US$30 billion investment. To safeguard Taiwan’s chip technology advantages, the government has barred local chipmakers from making chips using more advanced technologies at their overseas factories, in China particularly. Chipmakers were previously only allowed to produce chips using less advanced technologies, specifically
The New Taiwan dollar is on the verge of overtaking the yuan as Asia’s best carry-trade target given its lower risk of interest-rate and currency volatility. A strategy of borrowing the New Taiwan dollar to invest in higher-yielding alternatives has generated the second-highest return over the past month among Asian currencies behind the yuan, based on the Sharpe ratio that measures risk-adjusted relative returns. The New Taiwan dollar may soon replace its Chinese peer as the region’s favored carry trade tool, analysts say, citing Beijing’s efforts to support the yuan that can create wild swings in borrowing costs. In contrast,
VERTICAL INTEGRATION: The US fabless company’s acquisition of the data center manufacturer would not affect market competition, the Fair Trade Commission said The Fair Trade Commission has approved Advanced Micro Devices Inc’s (AMD) bid to fully acquire ZT International Group Inc for US$4.9 billion, saying it would not hamper market competition. As AMD is a fabless company that designs central processing units (CPUs) used in consumer electronics and servers, while ZT is a data center manufacturer, the vertical integration would not affect market competition, the commission said in a statement yesterday. ZT counts hyperscalers such as Microsoft Corp, Amazon.com Inc and Google among its major clients and plays a minor role in deciding the specifications of data centers, given the strong bargaining power of
TARIFF SURGE: The strong performance could be attributed to the growing artificial intelligence device market and mass orders ahead of potential US tariffs, analysts said The combined revenue of companies listed on the Taiwan Stock Exchange and the Taipei Exchange for the whole of last year totaled NT$44.66 trillion (US$1.35 trillion), up 12.8 percent year-on-year and hit a record high, data compiled by investment consulting firm CMoney showed on Saturday. The result came after listed firms reported a 23.92 percent annual increase in combined revenue for last month at NT$4.1 trillion, the second-highest for the month of December on record, and posted a 15.63 percent rise in combined revenue for the December quarter at NT$12.25 billion, the highest quarterly figure ever, the data showed. Analysts attributed the
RSS