Cisco may cut 10,000 jobs to revive profit growth
Source: Bloomberg News |
July 13, 2011, Wednesday
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Cisco Systems Inc, the largest networking-equipment company, may cut as many as 10,000 jobs, or about 14 percent of its workforce, to revive profit growth, according to two people familiar with the plans.
The cuts include as many as 7,000 jobs that would be eliminated by the end of August, said the people, who asked not to be identified because the plans aren't final. Cisco is also providing early-retirement packages to about 3,000 workers who accepted buyouts, the people said.
Cisco CEO John Chambers is slashing jobs and exiting less-profitable businesses as competitors such as Juniper Networks Inc and Hewlett-Packard Co take market share in Cisco's main businesses with lower-priced, simpler products. Sales of Cisco's switches and routers, which made up more than half of revenue last year, will continue to slip, said Brian Marshall, an analyst at Gleacher & Co.
Eliminating jobs will help Cisco wring US$1 billion in savings in fiscal 2012, the company said in May. Cisco expects costs of US$500 million to US$1.1 billion in the fiscal fourth quarter as a result of the voluntary early retirement program, it said in a quarterly filing.
"We will provide additional detail on the cost reductions, including layoffs, on our next earnings call," Karen Tillman, a spokeswoman for San Jose-based Cisco, said in reference to an earnings call scheduled for early August. She declined to discuss job-cut figures.
The voluntary retirement packages included one year's pay and medical benefits, and were offered to about 5,800 employees, two people said.
"The revenue trajectory hasn't been where it should be," Marshall, who has a "neutral" rating on the stock with a target price of US$17, said. "The company is not staffed on an appropriate level. They simply have too many employees."
Analysts at Gleacher and Miller Tabak & Co said yesterday that the company would cut at least 5,000 jobs as part of a turnaround effort.
Cisco's share of worldwide switching revenue dropped 5.8 percentage points to 68.5 percent in the first quarter of 2011 from a year earlier, according to a May report from Dell'Oro Group, a California-based researcher. Hewlett- Packard gained switching share in that period.
In global router sales, Cisco lost 6.4 percentage points to 54.2 percent of the market, while Juniper gained, Dell'Oro said.
Cisco's revenue is projected to rise 7 percent this year to US$43 billion, less than the 11 percent growth posted in 2010, according to the average estimate of analysts in a Bloomberg survey. Analysts have an average stock target price of US$20.62, Bloomberg data show.
The cuts include as many as 7,000 jobs that would be eliminated by the end of August, said the people, who asked not to be identified because the plans aren't final. Cisco is also providing early-retirement packages to about 3,000 workers who accepted buyouts, the people said.
Cisco CEO John Chambers is slashing jobs and exiting less-profitable businesses as competitors such as Juniper Networks Inc and Hewlett-Packard Co take market share in Cisco's main businesses with lower-priced, simpler products. Sales of Cisco's switches and routers, which made up more than half of revenue last year, will continue to slip, said Brian Marshall, an analyst at Gleacher & Co.
Eliminating jobs will help Cisco wring US$1 billion in savings in fiscal 2012, the company said in May. Cisco expects costs of US$500 million to US$1.1 billion in the fiscal fourth quarter as a result of the voluntary early retirement program, it said in a quarterly filing.
"We will provide additional detail on the cost reductions, including layoffs, on our next earnings call," Karen Tillman, a spokeswoman for San Jose-based Cisco, said in reference to an earnings call scheduled for early August. She declined to discuss job-cut figures.
The voluntary retirement packages included one year's pay and medical benefits, and were offered to about 5,800 employees, two people said.
"The revenue trajectory hasn't been where it should be," Marshall, who has a "neutral" rating on the stock with a target price of US$17, said. "The company is not staffed on an appropriate level. They simply have too many employees."
Analysts at Gleacher and Miller Tabak & Co said yesterday that the company would cut at least 5,000 jobs as part of a turnaround effort.
Cisco's share of worldwide switching revenue dropped 5.8 percentage points to 68.5 percent in the first quarter of 2011 from a year earlier, according to a May report from Dell'Oro Group, a California-based researcher. Hewlett- Packard gained switching share in that period.
In global router sales, Cisco lost 6.4 percentage points to 54.2 percent of the market, while Juniper gained, Dell'Oro said.
Cisco's revenue is projected to rise 7 percent this year to US$43 billion, less than the 11 percent growth posted in 2010, according to the average estimate of analysts in a Bloomberg survey. Analysts have an average stock target price of US$20.62, Bloomberg data show.
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