Cisco has been investing in new products like data analytics software and cloud-based tools for data centres to offset the impact of sluggish sales of network switches and routers.
Advertisement
The cuts were announced on Wednesday in the company’s Fourth Quarter and Fiscal Year 2016 Earnings report.
Savings from up to 5,500 job cuts would be reinvested into key growth areas, Cisco said.
“We think this is partly an effort by (CEO) Chuck Robbins to put a stake in the ground and send a message that this is going to be a leaner, meaner Cisco that is focused on driving software and recurring revenue business”, said Guggenheim Securities analyst Ryan Hutchinson.
“We’re uncertain how to model any improvement in those two (segments) in particular going forward”, Robbins told analysts on a call, speaking of service providers and emerging markets.
The news comes as a bit of a shock considering that Cisco’s stock has increased more than 15 per cent over the past three months and hit a nine-year high on this week at $31.23 per share.
Robbins said Cisco also sees promise for revenue in providing security for networks. “The customer expectations are changing, technology is transitioning faster than ever”. “Those businesses have great margins and it’s part of the overall transition”.
The company said that for the quarter ended July 30, it earned $2.8 billion, or 56 cents a share, on $12.6 billion, compared with a profit of $2.3 billion, or 45 cents a share, on $12.8 billion in sales in the same period a year ago.
Other large investors have recently bought and sold shares of the company. Vetr downgraded shares of Cisco Systems from a “strong-buy” rating to a “buy” rating and set a $29.92 price target for the company.in a research report on Tuesday, May 10th.
Analysts on average had expected a profit of 60c and revenue of $12.58bn, according to Thomson Reuters I/B/E/S.
Cisco said charges associated with the restructuring would be about $700 million, of which $400 million would fall in the first quarter of fiscal 2017.
No details have been provided on the geographical spread of proposed job cuts.
A report from CRN earlier this week cited “multiple sources close to the company” saying that Cisco planned to slash up to 14,000 jobs or close to 20% of its global workforce.
A Cisco office is pictured in San Diego, California, in this November 12 2012 file photo.
Advertisement
According to Cowens price target of 40 on the company’s stock this indicates the broker now believes there is an increase of 30.21% from Cisco Systems, Inc.’s current price of 30.72.
