May 13, 2011

Cisco Eliminating Thousands Of Jobs

Cisco Systems Inc. said on Wednesday that it is set to eliminate thousands of jobs as part of cost-cutting moves to get profits growing again.

If the number of layoffs is similar to the cut in expenses Cisco is taking, then it could amount to about 4,000 to 5,000 jobs being lost.

CEO John Chambers signaled that he is accepting long-standing criticism that the company is trying to compete with too many markets.  He vowed to radically simplify the company.

The company gave a financial forecast on Wednesday for the current quarter that was well below analyst expectations.

Chambers said he wants to cut annual expenses by $1 billion, or about 6 percent.  He did not say how many jobs he is eliminating, mainly through an early retirement program.

Two years ago, Cisco also shaved $1 billion of annual expenses.  During that time it cut travel, stopped hiring and instituted an early retirement program.

This time the company is trying to address long-term challenges, not a recession.   Chambers said the company may sell underperforming units.

Cisco's revenue from its network switches segment fell 9 percent in the quarter.  Chambers said the company is introducing new products quickly to fight back.

Cisco has benefited as the leading provider of the equipment that powers the Internet.  Chambers has a long term goal of 12 percent to 17 percent annual revenue growth through the recession and its aftermath.  He said on Wednesday that goal is  "not reflective of the environment," and he'll provide a new target in September.

"We know what we have to do. We have a clear game plan," Chambers told analysts on a conference call. "We've had to make big changes before, and each time we've made these changes, we've emerged even stronger."

Cisco said net income dropped about 18 percent during the third quarter, which ended on April 30.

Sales jumped 5 percent to $10.9 billion, which matched analyst expectations.

Wall Street analysts said they were pleased to see Cisco taking quick and decisive action on restructuring.

"It's hard to criticize the pace and scope," Colin Gillis, an analyst with BGC Partners, told Reuters. "We all love the billion dollars in cost savings, but you never cheer people losing their jobs."


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