The technology company based in San Jose, northern California, said it would optimize cost base in lower growth areas of its portfolio and further invest in key priority areas such as security, the internet of things, collaboration, next generation data center and cloud.
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Despite the cutbacks, recent announcements appear to show that Cisco remains committed to its United Kingdom operations, which began almost 25 years ago.
Though Cisco (CSCO) topped Wall Street forecasts for earnings and revenues, shares of the IT group dropped following the company’s fourth fiscal-quarter earnings report Wednesday. Cisco expects about $325m to $400m of the charges to be addressed during the first quarter of 2017, and the remaining amount during the rest of the year.
“Cisco is plodding along”, said David Heger, an analyst at Edward Jones & Company. The new emphasis is being orchestrated by CEO Chuck Robbins, who replaced the Cisco’s long-time leader, John Chambers, almost 13 months ago.
“We are looking at the areas where we believe growth will come faster”, Robbins said in a conference call. “Those businesses have great margins and it’s part of the overall transition”. The acquisition of CloudLock Inc., a provider of cloud access security technology provides opportunities for Cisco to enable clients’ secure cloud adoption and address demand for cloud-based security services, as customers increasingly prefer to consume security technologies “as a service” rather than traditional perpetual licenses.
In after-hours trading, Cisco shares were off by nearly 1 percent at $30.47. During Wednesday’s trading session, the shares fell 1.3%.
Cisco earned 63 cents per share, three cents above the FactSet consensus. The company reported a revenue of $12.6bn, up 2%, with product revenue up 1% and service revenue up 5%.
Analysts on average had expected a profit of 60c and revenue of $12.58bn, according to Thomson Reuters I/B/E/S.
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.
Earlier reports had suggested the company planned to cut between 9,000 and 14,000 jobs as it moves from being a hardware to software-focused business.
“We continue to execute well in a challenging macro environment”, said Cisco Chief Executive Office Chuck Robbins about the fourth quarter.
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Cisco Systems Inc. headquarters in San Jose, Calif., is shown in August 2003.
