26 May 2017

Cisco to Cut 8% of Staff During Rebuilds

Cisco to Cut 8% of Staff During Rebuilds
Image Courtesy : businessinsider

Cisco Systems will shed about 6,000 workers, or 8% of its staff, in a fresh round of job cuts that will bring the reduction in its workforce to 18,000 in the past three years, according to The Financial Times. John Chambers, chief executive of the San Jose, California-based networking equipment maker, said almost all of the savings from the latest job cuts, out of a total workforce of 74,000, would be reinvested in new businesses such as data centers and internet security.

The company said its revenue has stopped declining, although its business in developing countries has continued to shrink rapidly, partly because of revelations by Edward Snowden that the company has been involved in US internet surveillance, according to FT. And despite the recent job cuts, Cisco’s headcount has risen by around 3,000 in the last three years due to acquisitions and other investments as it sought to expand beyond its core routing and switching business. Despite the headwinds, Cisco’s business with enterprise customers in the US and Europe did better than expected, enabling it report overall revenues for the quarter ending in July of $12.4 billion, in line with the previous year and ahead of expectations. Sales to enterprise customers in the US, the UK and Germany had risen by more than 10%. The Cisco chief executive said the rebound in these countries showed that the new strategy Cisco embarked on two years ago, to move beyond its dependence on sales of routers and switches, was working.

Analysts had been expecting revenues of $12.14 billion and pro form a earnings per share of 53 cents, compared to $12.4 billion and 52 cents a share a year ago. Chambers said sales in the BRIC countries and Mexico fell around 12% in the latest quarter, and unlikely to return to growth for several quarters. He attributed most of the problems to slow economic growth in the developing world and geopolitical issues that have hit sales in countries like Russia.

Cisco Systems launched a fresh round of job cuts that will hit 6,000 workers, taking the total cuts to 18,000 in the last three years as it struggles to reposition its business in new markets in pursuit of growth. The news came on Wednesday as the US networking equipment maker reported an end to the revenue contraction it suffered following revelations about US internet surveillance. However, it also said that its business was continuing to contract sharply in developing countries, despite its hopes earlier this year for a recovery. John Chambers, chief executive, said almost all of the savings from the latest job cuts, out of a total workforce of 74,000, would be reinvested in new areas such as Cisco’s datacentre and security businesses. The latest round would lead to pre-tax charges against earnings of around $700 million, the company said.

The news came as Cisco registered a stabilization in its business after two quarters of revenue declines. Its business has been particularly hard-hit in the developing world, partly because of concern among customers following revelations by former US intelligence contractor Edward Snowden. Cisco suffered from a further slide in its sales to communications service providers, where orders were down 11%, and a transition to a number of new products that are at an early stage of being tested by customers.

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