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Cisco confirms 5,500 lay-offs amid restructuring

Networking giant has confirmed it will cut more than 5,500 jobs in an effort to trim the fat in low-growth business areas and enhance its performance elsewhere

Networking bellwether Cisco has confirmed reports that it will cut jobs as it restructures to optimise its cost base in low-growth areas and invest in priority areas including collaboration, cloud, the internet of things (IoT) and next-generation datacentres.

Initial reports, which surfaced on 17 August, suggested the supplier would let as many as 14,000 employees go, but Cisco actually plans to cut 5,500 positions.

But this still represents about 7% of the supplier’s total workforce and is one of the largest rounds of redundancies it has ever made. The job losses will take effect in the coming quarter.

Speaking to analysts on a conference call transcribed by Seeking Alpha, Cisco CEO Chuck Robbins said the restructuring did not necessarily mean Cisco was “ignoring one in favour of another”.

“We actually are working very diligently on bringing innovation to our core,” said Robbins. “We are focused on a tighter coupling of security into the core. We are focused on policy and orchestration and cloud-based management across the entire portfolio.

“We just want to make sure that our investments are commensurate with the growth opportunity from a relative perspective.”

The cuts were announced alongside Cisco’s year-end and fourth-quarter financial results. Full-year sales were up 3% to $48.7bn, but flat at $49.2bn if including revenues from its now sold service provider video business, while net profit rose 20% to $10.7bn.

In the final three months of its financial year, the supplier made sales of $12.6bn (£9.6bn), up 2% year-on-year when excluding video business, down 2% year-on-year including it. Net profit of $2.8bn was up 21% on the year before.

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Digging into the figures, Cisco CFO Kelly Kramer said product revenue had grown by 1% and services by 5%. Switching was up 2%, driven by strength in next-generation datacentres and its software-defined Application-Centric Infrastructure (ACI). Routing was down by 6%, while collaboration  was up 6%, but datacentres dropped 1%.

In other areas, Cisco’s hyper-converged HyperFlex saw solid early growth, which it attributed to its “highly differentiated architecture”. Wireless was up 5% thanks to the impact of the cloud-based Meraki business, and security emerged as the strongest performer, up 16%, particularly in areas such as advanced threat and web security systems.

By geography, EMEA was down 3% overall in the final quarter, a decline Robbins attributed largely to service providers, and not to the impact of the 23 June Brexit vote.

“What we saw from a Brexit perspective is exactly what you would expect,” he said. “In the UK proper, we saw customers pause. We saw them just kind of slow a bit because they are uncertain. And we also saw the impact of the currency devaluation, which you would expect. But we remain very committed there. We think we’ll work through this.”

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