Latest Cisco Restructuring To Impact 6,000 Jobs

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Cisco Systems Wednesday revealed plans for another corporate restructuring that will see it shed 6,000 jobs, or roughly 8 percent of its global workforce, in a bid to refocus on what the networking leader called key growth areas including cloud, software and security.

The layoffs, mentioned Wednesday during Cisco's fourth-quarter earnings call with analysts, will start in Cisco's first fiscal quarter. Cisco did not say which parts of its business will be impacted.

"If we are going to become the No. 1 IT player, which we are going to do, our ability to move requires decisiveness and it requires investing in these growth [areas]," Chief Executive John Chambers said on the call.

[Related: CRN Exclusive: 30 Tough Questions For Cisco's John Chambers]

The job cuts come after several bumpy quarters for Cisco financially. In December, the San Jose, Calif.-based company slashed its long-term revenue growth outlook for the next three to five years to be in the range of 3 percent to 6 percent. That compares with original guidance of 5 percent to 7 percent.

The layoffs also come as Cisco's core network hardware business faces new pressure amid a market shift to software-defined networking, a technology that takes the high-end functions of switches and routers and turns them into software that can run on cheap, commodity hardware. In Cisco's fourth quarter, ended July 26, its switching and core routing businesses were down 4 percent and 7 percent, respectively.

Mont Phelps, CEO of Waltham, Mass.-based NWN, one of Cisco’s top national enterprise partners and No.  81 on the CRN SP500, said he sees the kind of workforce restructuring that Cisco is doing as a fact of life in the cloud era.

“Nobody likes to see that kind of reduction in force but it is the right thing for their business,” Phelps said. “It is not something that will make Cisco weaker. It should actually make them stronger. The world is changing, but the sky is not falling. Cisco is obviously still a leader. Like all of us they still need to negotiate the challenges ahead but I have confidence in them.”

A year ago, also during its fourth quarter earnings call, Cisco announced plans to cut 4,000 jobs. Cisco has parted ways with a total of roughly 12,000 employees since kicking off a broader corporate restructuring in July 2011.

Despite the cuts, Cisco's fourth quarter results beat both its own and analysts' estimates.

Revenue for the quarter totaled $12.4 billion, down 0.5 percent from the year-ago period. Wall Street analysts expected revenue of $12.1 billion, according to Thomson Reuters.

Net income for the quarter was $2.2 billion, down one percent from a year earlier.

Cisco said its enterprise business was up 9 percent globally, while its service provider business continued to be a pain point, declining 11 percent year-over-year. Cisco's U.S. enterprise business rose 16 percent year-over-year, a jump Chambers said is one of the most significant Cisco has seen in "many years."

While Cisco's overall U.S. business grew 5 percent, emerging markets continued to be a challenge, falling 9 percent compared to last year.

In addition to Cisco's switching and core routing businesses taking a hit, its collaboration business also slipped, with revenue down 4 percent compared to last year.

Cisco's data center business grew more than 30 percent -- driven largely by the strength of its Unified Computing Systems (UCS) business -- while wireless was up 8 percent and security was up 29 percent.

For the full year 2014, Cisco reported revenue of $47.1 billion, down three percent compared to 2013. Net income for the year was $7.9 billion, down 21.3 percent year-over-year.

Cisco shares were down about 1 percent in after-hours trading Wednesday. The company had a recent market value of $129.09 billion.

NEXT: Chambers Talks ACI, Intercloud Progress

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