Cisco to slash 4,000 jobs amid weak economic recovery, despite growing profits

Cisco Systems said it will cut 4,000 jobs, or about 5 percent of its workforce, as the networking vendor faces uncertain demand for its gear and services in many markets.

The cuts come despite the fact that Cisco reported a jump in net income of 18 percent for its fiscal fourth quarter, to $2.27 billion, up from $1.92 billion a year ago. The company forecast revenue for the fiscal first quarter, which runs through the end of October, of $12.2 billion to $12.5 billion, which is less than the $12.5 billion analysts expected, according to Bloomberg. Revenue increased 6 percent, to $12.42 billion, up from $11.69 billion.

"The environment in terms of our business is improving slightly but nowhere near the pace that we want," CEO John Chambers said on the company's earnings conference call, a sentiment he echoed multiple times.

Cisco is often seen as a bellwether of the technology sector because it sells so many different products and works with a wide array of partners and vendors. While orders from customers in the Americas rose 5 percent in the last quarter, orders from Asia declined 3 percent and Cisco's business in China fell 6 percent.

"It's just not growing at the speed we want, the inconsistency of global GDP growth and about the time you see Northern Europe start to get stronger, you see the issues in emerging markets start to get softer," Chambers said, according to a Seeking Alpha transcript.

Chambers said "a fair amount" of the 4,000 jobs being cut "will be allocated to new growth opportunities," including mobile equipment, data centers, cloud computing and software markets.

"We're bringing advance software and management tools to carriers that will enable them to lower operating cost and drive efficiencies around their overall network spend," Chambers said on the call. "We believe our internal innovation coupled with the recent acquisitions of BroadHop, Cariden, Intucell and Ubiquisys position us to be the clear No. 1 in this mobile market over the long run."

Indeed, Cisco has been on a mobile-focused acquisition streak. In April it said it would buy UK-based small cell firm Ubiquisys in a deal valued at $310 million. Cisco's other recent acquisitions in mobile include $475 million for Intucell, which specializes in self-optimizing network (SON) software; BroadHop, which provides more than 70 policy installations at service providers around the world; and $1.2 billion for Wi-Fi and cloud networking vendor Meraki.

For more:
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this NYT article
- see this Reuters article
- see this AlThingsD article

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