Cisco cuts labor to refocus on growth
Print Edition
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 over 9 percent after hours, their biggest drop in more than a year if reflected on Nasdaq yesterday.
A lukewarm revenue forecast dashed expectations that Cisco could overcome muted demand for tech 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 data centers and corporate cloud networking as key to growth. But 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,” said Chief Executive John Chambers on a conference call following quarterly earnings. “We have to very quickly reallocate the resources.”
Cisco said last month it plans to buy cyber security company Sourcefire Inc for US$2.7 billion. Cisco 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 hopes. Despite strength in the US, weakness in Asia and mixed results from Europe continued to dog its business.
Chambers’ take on the global corporate technology environment is closely watched by investors, as Cisco is seen as a strong indicator of the general health of the technology industry because of its broad customer base.
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