Rumors were swirling ahead of Cisco’s (NASDAQ: CSCO) fiscal fourth-quarter and full-year 2016 earnings announcement on Wednesday that planned to lay off as many as 14,000 employees in the near future – approximately 20% of its workforce.
Advertisement
Cisco reported a 21 per cent increase in net quarterly profits to $2.81bn, yet cautioned of a “challenging macro environment” as revenue fell to $12.64bn from $12.84bn in the quarter to 30 July. Analysts on average predicted adjusted earnings of 60 cents a share on sales of $12.57 billion, according to FactSet.
The Silicon Valley company announced the cuts, about 7% of its global workforce, during its fiscal financial earnings report.
Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. The company projected sales growth of as much as 3 percent in the period that ended in July, compared with analysts’ projections for a revenue decline.
The rise in profit came with annual revenue rising three percent year-over-year to $48.7 billion.
Savings from up to 5,500 job cuts would be reinvested into key growth areas, Cisco said.
The gradual move to fast-growing areas such as the cloud, the Internet of Things and security is a response to dropping demand from telecom carriers and enterprise customers for Cisco’s traditional lineup of networking hardware devices such as switches and routers.
He has been working to rekindle growth by shifting Cisco’s offerings toward software-based networking, security and management products. CRN, a technology publication, first reported Tuesday that Cisco planned to cut 14,000 jobs or nearly 20% of its workforce. It will begin in the current quarter, from a workforce of more than 73,700 at the end of April, Cisco said Wednesday in a statement. That was partially made up for by security, which grew 16 percent, and collaboration, which posted a 6 percent gain in sales.
The company last announced a large round of firings in August 2014, when it eliminated 6,000 positions.
Advertisement
“Microsoft is a showcase for how a successful pivot is done and it took about this time to get to a point where we could definitively say their shift of focus from what they were to what they are was successful”, Enderle added.
