Cisco to cut 1,100 more jobs as sales weaken — its shares take a beating
SAN JOSE — Cisco Systems Chief Executive Chuck Robbins likes to the say the networking-equipment giant is on a “journey” as it transitions toward offering more software and subscription-based services.
And there are about to be 1,100 fewer Cisco employees going on that journey.
Cisco announced its latest round of job cuts deep within a statement disclosing its fiscal third-quarter results late Wednesday. Cisco said the 1,100 jobs were being eliminated, on top of an August 2016 announcement that it would cut 5,500 jobs, as it adds more focus on software and services.
Cisco said it would take pre-tax charges of $150 million related to its latest round of job cuts, in addition to the $614 million in charges it has already taken during the first nine months of its current fiscal year.
A Cisco spokeswoman said the company would give no details about where the job reductions would take place.
“We are pleased with the progress we are making,” said Robbins, on a conference call to discuss the company’s results and outlook, adding that Cisco’s current transformation “will take a number of years” to complete.
In addition to the job-cut announcement, Cisco shares plunged 7.5 percent in after-hours trading, to $31.29, as the company forecast fourth-quarter earnings of between 60 cents and 62 cents a share, excluding one-time items. Cisco also said it expects revenue for the quarter to fall between 4 percent and 6 percent from the $12.6 billion it reported a year ago.
That revenue forecast would put Cisco’s sales in a range of $11.84 billion to $12.1 billion. Analysts surveyed by Bloomberg had forecast Cisco to earn 62 cents a share on $12.5 billion for the quarter that ends in July.
Analyst Greg Young, who covers Cisco for technology research firm Gartner, said that the company’s transition to more software and services “can’t be done overnight given their large customer base,” and that it has to keep a delicate balance between where it has historically been strong and where it’s trying to go.
“Cisco cannot leap ahead of trends too far and miss the path, nor hang back and be too late of an adopter,” Young said. “Getting that speed correct is what everything follows from.”
Cisco Chief Financial Officer Kelly Kramer said the company’s outlook was being impacted by “a combination of many factors.” Those included third-quarter orders that were lower than expected, a trend which Kramer said Cisco expects to continue into its fourth quarter.
Robbins added that slower sales to the public sector and federal government, some of Cisco’s traditionally strong business areas, were impacting the company’s near-term growth prospects.
“Frankly, it’s (been) a pretty significant stall, with a lack of (federal) budget visibility,” Robbins said.
Rob Enderle, director of technology research firm the Enderle Group, said the immediate reaction to Cisco’s outlook may be a bit overblown, as the company is beholden, to a degree, to what kind of public sector decisions are made in Washington.
“With all transitions there is a large element of risk,” Enderle said. “Not only is the market very fluid, but the environment in which we are operating is unusually fluid with administration concerns currently overshadowing all else. For the next quarter, I expect Cisco’s stock performance may have more to do with whatever is going on in the White House more than anything Cisco actually does as a result.”