Cisco cuts 6,000 jobs as CEO seeks turnaround

Demand for company's network routers and switches continues to decline.

By MSN Money producer Aug 13, 2014 5:53PM

The headquarters of Cisco Systems in San Jose, Calif. © Kristoffer Tripplaar/Alamy

By Peter Burrows, Bloomberg Bloomberg

 

Cisco Systems (CSCO) is cutting 6,000 jobs, or 8 percent of its workforce, as it faces weakness in emerging markets and a slump in demand from telecommunications-service providers.

 

The world's largest networking-equipment maker had about 75,000 staff at the end of July. Including the latest round, Cisco has eliminated more than 18,000 employees over the past three years.

 

John Chambers, who is nearing retirement after almost two decades as Cisco's chief executive officer, has been grappling with slowing growth for its market-leading routers and switches. Phone carriers and other large companies are replacing legacy network hardware with software that performs many of the same tasks.

 

"It's a transition that's inexorable, and it really puts the pressure on Cisco," said Alex Henderson, an analyst at Needham & Co., who has a hold rating on Cisco's stock.

 

Sales in the current fiscal quarter through October will be $12.1 billion to $12.2 billion, based on the company's forecast for revenue to remain flat or rise 1 percent.

 

The shares of San Jose, California-based Cisco fell in extended trading. The stock advanced less than 1 percent to $25.20 at the close in New York, leaving it up 12 percent this year, compared with a gain of 5.3 percent in the Standard & Poor's 500 Index ($INX).

 

Market shift  

Revenue in the period that ended July 26 was $12.4 billion, the company said in a statement today. That beat the average analyst estimate for $12.2 billion, according to data compiled by Bloomberg. Profit, excluding some items, was 55 cents a share, versus a projection for 53 cents.

 

Net income in the fourth quarter fell to $2.25 billion, or 43 cents a share, from $2.27 billion, or 42 cents, a year earlier.

 

Cisco faces a challenging shift as customers move from buying hundreds or thousands of proprietary machines with gross margins of 60 percent or more to software-defined networks that can run more efficiently on cheaper gear. The trend has been embraced by companies including Google Inc. and Facebook Inc.

 

For the year, Cisco's sales fell 3 percent to $47.1 billion, the first decline since 2009.

 

Cisco has exited consumer businesses, cut staff and restructured its management in the past three years. The company has come under increased pressure from rivals including Huawei Technologies Co. and Arista Networks (ANET) in its main businesses, while newer competitors such as Palo Alto Networks (PANW) and FireEye take share in growing markets such as computer and network security.

 

More from Bloomberg

 

 

Tags: $INXCSCO
80Comments
Aug 13, 2014 6:23PM
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That means the "unemployment rate" drops to 5%! 
Aug 13, 2014 7:45PM
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I bet John Chambers will be retiring with a nice big fat pension. Maybe if we cut  Mr. Chambers big fat pension maybe we could save about 100 jobs. Sorry its not happening though! This economy is terrible today. Driven by nothing but greed!
Aug 13, 2014 7:19PM
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When in doubt, cut the throats of some of your employees.
Aug 13, 2014 7:05PM
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Unless any of them happen to be in the fixed unemployment pool of homes that are surveyed over an over, not a one will be counted as unemployed.


Aug 13, 2014 7:31PM
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Bad news for 6K people :(
And this economy sucks. If they're well paid jobs $40K to 60K, I think many find it tough to find a job that breaks $30K. 
Disappointing news.  Hope like the other guy said, that they were just "dead weight".  
Even though I don't like thinking of peoples' former lively hood as dead weight.
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the best bumpers ticker I have ever seen said "outsource management"
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Time to boycott them. Guess what...they are hiring 12000 in China to replace them!


Aug 13, 2014 8:05PM
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I am sure the CEO gets an outrageous bonus no matter what and a huge retirement with other benefits.
Aug 13, 2014 8:27PM
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that's 6000 more jobs for the people in India.
Aug 13, 2014 6:24PM
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I don't buy the official storyline.


"Cisco faces a challenging shift as customers move from buying hundreds or thousands of proprietary machines with gross margins of 60 percent or more to software-defined networks that can run more efficiently on cheaper gear. The trend has been embraced by companies including Google Inc. and Facebook Inc."


This may be one factor, but Western economies are struggling or contracting. Also there may be deadweight that rightly needs to be cut out just to spur existing engineers and managers to become more creative and effective or face extinction. Cisco used to be creative... years ago...

Aug 13, 2014 9:47PM
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Cool, McD's , WalMart , Wendy's and such have never had it so good, 6,000 more people to add to the minimum wage payroll. Pretty soon the USA will be an "Outlet store Fast Food" economy. Cheap goods, cheap junk food and an income level of a million dollars needed in order to qualify for the label of middle class.
Aug 13, 2014 8:51PM
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No layoffs, The guvmint says every things just peachy. And we know the guvmint don't lie.
Aug 13, 2014 9:36PM
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Sure the employment situation is really getting much better.  Microsoft, Boeing, all the hi-tech companies, other businesses, retail are getting rid of employees.  Especially top CEO"s of major Businesses, and Corps.  It so happens the ones getting layed off are in their mid 40's or 50's, which makes it much harder to keep the same kind of job or find one like it.

 

It's all in the name of using part-time workers--they don't have to pay for ACA---The Global economy is also not so good.

 

When is  lying to the American public going to stop---how many people do you know who will not have a job very soon?  This is the "New Normal" for Employment---"Don't work too hard, do not be loyal to your Company

Aug 13, 2014 8:45PM
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News like this is bound to send stocks soaring through the 18,000 mark ! it means lower unemployment and higher profits.
Aug 13, 2014 7:59PM
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6000 more shovel ready jobs!!

Shoveling OBUMMMA BS, and lies.

Aug 13, 2014 9:45PM
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so companies have a loyalty to their shareholders, but shouldn't companies collectively consider the impact of mass layoffs in the economy? 
layoffs > more unemployment > less people to buy your products (whether you sell directly to consumers or your consumers are other businesses who in turn rely on a good employment)

it becomes a vicious cycle if you let it. 
Aug 13, 2014 9:20PM
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And the economy is ROCK SOLID (see the Money section) 
Aug 13, 2014 7:40PM
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There one of those MSN moronic red banners today stating Cisco just beat expectations. Now lay offs. Here's a tip for the CEO... JUMP. 
If we can't get RID of these psychopathic pariah, we will go down forever because of them. End the era of Kool Aid.  
"Cisco's 4th-Qtr Sales, Profit Top Estimates
Aug. 13 (Bloomberg) -- Cisco Systems' fiscal fourth-quarter sales and profit topped analysts’ estimates, as the introduction of new products starts to boost revenue. Matt Miller takes a look at the numbers on "Street Smart." (Source: Bloomberg)"
The Yellow Journalism award goes to-- Bloomberg.
Aug 13, 2014 10:13PM
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You can bet these job eliminations will not show up in any of the monthly job reports.  Since according to the gov the job market is the best since 2001, I am sure all these former Cisco workers will have no problem finding suitable jobs as long as they don't mind part-time seasonal work with no benefits.  Just remember folks...all is well in our economy and if you don't believe me just ask our gov or the gov controlled media.
Aug 13, 2014 9:42PM
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Another goof for you Obamantion.  Was next laying off the Congress and House of representatives??  You are the worst president EVER. 
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