Cisco Systems is cutting 6,000 jobs and forecasting little to no revenue growth in the current quarter amid a slump in demand from phone and cable companies, and weakness in emerging markets.
The world’s largest networking-equipment maker, which has about 74,000 employees, said it will take a pre-tax charge of as much as $700 million.
Including the latest round of job losses, which represent about 8 per cent of the workforce, Cisco has made more than 18,000 people redundant 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.
Sales in emerging markets won’t recover for several more quarters, Chambers said on a conference call.
Sales in the quarter that ends in October will be $12.1 billion to $12.2 billion, based on the company’s forecast for revenue to be unchanged or rise 1 percent.
The shares of Cisco fell as much as 3.3 per cent 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 per cent in the Standard and Poor’s 500 Index.
Revenue in the period that ended July 26 was $12.4 billion, the company said in a statement today, topping analysts’ estimate for $12.2 billion.
Profit, excluding some items, was 55 cents a share, versus a prediction for 53 cents.
Cisco’s orders in the US rose 5 per cent, while those in Asia fell 7 per cent.
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 per cent or more to software-defined networks that can run more efficiently on cheaper gear.
The trend has been embraced by companies including Google and Facebook.
Bloomberg
