Cisco sales and profits rise but 5,500 staff go

Alan Burkitt-Gray
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Restructuring to start in the current quarter as Cisco announces a focus on security, IoT, collaboration, data centres and cloud

Cisco has announced it is to lay off 5,500 people – less than 24 hours after the news was leaked that layoffs could be in the range 9,000 to 14,000.

Revenue for the whole year was up 3% to $48.7 billion, the company announced. Growth was slower in the last quarter, at only 2%, to reach $12.6 billion. Net income for the full year was up from $9 billion to $10.7 billion.

The company’s strongest growth was in the Asia Pacific region, including Japan and China. Europe, the Middle East and Africa was essentially flat.

“We had another strong quarter, wrapping up a great year,” said CEO Chuck Robbins. “I am particularly pleased with our performance in priority areas including security, data centre switching, collaboration, services as well as our overall performance.”

He said the business had slowed in two sectors – service providers and emerging markets “after three consecutive quarters of growth” – but the rest of the business had shown a 5% growth in orders.

“This growth and balance demonstrates the strength of our diverse portfolio. Our product deferred revenue from software and subscriptions grew 33% showing the continued momentum of our business model transformation,” said Robbins.

It’s change in the market, from hardware-based services to software-based and virtualised services, that is causing Cisco to announce its reduction in staffing levels.

The company said: “The restructuring will eliminate up to 5,500 positions, representing approximately 7% of our global workforce, and we will take action under this plan beginning in the first quarter of fiscal 2017.” The 2016 fiscal year ended on 25 July, so Cisco is already in its first quarter of 2017.

The restructuring will enable the company “to optimise our cost base in lower growth areas of our portfolio and further invest in key priority areas such as security, IoT, collaboration, next generation data centre and cloud,” said the Cisco statement. “We expect to reinvest substantially all of the cost savings from these actions back into these businesses and will continue to aggressively invest to focus on our areas of future growth.”