Cisco cuts 1,100 jobs as earnings disappoint

NEW YORK • Cisco Systems, the biggest maker of equipment that runs the Internet, said it was cutting 1,100 jobs after reporting weaker-than-expected financial results in the past quarter.

A disappointing sales forecast also underscores the challenges facing its multibillion-dollar hardware business during an industry shift towards cheaper, software-based networking.

Revenue in the current period may decline as much as 6 per cent from a year earlier, the company said on Wednesday in a statement.

That indicates sales of as little as US$11.9 billion (S$16.5 billion), far short of the average analysts' projection of US$12.5 billion.

Cisco also said it is cutting an additional 1,100 jobs on top of the 5,500 it announced last August. Following the announcement, Cisco shares slumped more than 5 per cent in after-hours trading.

Cisco is one of the largest makers of Internet network equipment, making hardware for a range of industries ranging from telecommunications to connected devices.

The California-based company - which last year said it would eliminate around 7 per cent of its workforce, or 5,800 jobs - said the plan now required further cuts, without offering details on the regions or staff concerned. It had some 71,959 employees at the end of January.

The company faces slowing demand for the high-priced combinations of hardware and software that make up the bulk of its business, in part because corporate customers have been spending less on in-house data centres.

Chief executive officer Chuck Robbins is trying to recast Cisco as a provider of networking services, seeking to reduce its dependence on hardware by offering more software and cloud-based products that provide predictable revenue.

During the transition, the company faces slowing demand for the high-priced combinations of hardware and software that make up the bulk of its business, in part because corporate customers have been spending less on in-house data centres.

"They're fighting some headwinds in their traditional products," said JMP Securities analyst Erik Suppiger, adding that he does not think Cisco can return to higher rates of overall sales growth in the next couple of years. "It's not a very quick transition."

Cisco shares fell as much as 8.5 per cent in extended trading following the announcement.

Earlier, the stock had slipped 1.4 per cent to US$33.82 at the close in New York, amid a broad market decline. The shares are up 27 per cent in the past year.

AGENCE-FRANCE PRESSE, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on May 19, 2017, with the headline 'Cisco cuts 1,100 jobs as earnings disappoint'. Print Edition | Subscribe