Cisco Systems Inc. is cutting 6,000 jobs, or 8 percent of its workforce, as it faces weak sales in emerging markets and a slump in demand from telecommunications-service providers.
The world's largest networking-equipment maker, which has more than 73,000 employees, said it will take a pretax charge of as much as $700 million. Including the latest round of firings, Cisco has lost more than 18,000 people 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 during a conference call.
"They're making good progress, but this emerging market weakness is going to make things hard for Cisco for the next few quarters," said Alex Henderson, an analyst at Needham & Co., who has a hold rating on Cisco's stock.
Sales in the quarter that ends in October is expected to be $12.1 billion to $12.2 billion, based on the company's forecast for revenue to be unchanged or rise 1 percent. Analysts are projecting, on average, $12.1 billion, according to data compiled by Bloomberg.
The shares of San Jose, Calif.-based Cisco fell as much as 3.3 percent 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 percent in the Standard & Poor's 500 index.
Revenue in the period that ended July 26 was $12.4 billion, the company said in a statement Wednesday. That beat analysts' estimates for $12.2 billion. Profit, excluding some items, was 55 cents a share, versus a prediction of 53 cents.
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 percent or more to software-defined networks that can run more efficiently on cheaper gear. The trend has been embraced by companies including Google Inc. and Facebook Inc.
For the fiscal year, Cisco's sales fell 3 percent to $47.1 billion, the first decline since 2009.
Cisco has exited consumer businesses, cut staff and restructured its management. But Cisco has also added staff, resulting in a net reduction in headcount of about 3,000, according to the company.
Business on 08/14/2014