Cisco Layoff to Hit 6,000 Workers, Pressure on Chambers?

Cisco Systems (CSCO) plans to fire up to 6 percent of its workforce, or some 6,000 employees despite delivering FQ4 sales and earnings that exceeded analysts’ expectations. For the period, Cisco earned 55 cents a share, up nearly 6 percent, and a less-than-expected sales decline to $12.36 billion from the prior year’s $12.42 billion.

However, along with the substantial layoffs, the networking giant projected flat earnings and sales for the current quarter, dampening its stock price nearly 3 percent and pointing to its continued weaknesses in maintaining consistent growth in its core switches and routers business, holding its own in the nascent software-defined networks (SDN) market and not slipping in growth markets such as China and Brazil. Cisco’s Q4 sales tumbled 23 percent in China and 13 percent in Brazil.

Cisco said it will take a restructuring charge of some $700 million associated with the layoffs, which marks the fourth summer in a row the vendor has cut its workforce. The company said it will take some $250 million to $350 million of the charges in Q1.

Summer layoffs have become somewhat of a regular occurrence for Cisco, with the vendor cutting some 4,000 jobs last August, slashing 1,300 positions in July 2012 and issuing pink slips to 6,500 employees in July 2011, as chronicled by the San Jose Mercury News.

Still, Cisco chief John Chambers said the vendor’s total headcount will not change during the course of the fiscal year.

"We’re moving our company to where the growth is going to be,” Chambers told Bloomberg News, “in areas like the cloud, software, security.”

For the full fiscal year, Cisco said its sales slid 3 percent to $47.1 billion while earnings fell 21 percent to $7.9 billion or $1.49 a share. Chambers said that Cisco’s $2.2 billion in earnings for Q4 set a company record for the period.

Will Cisco’s continuing struggles speed up Chambers’ retirement plans? Unlikely.

“We had two down quarters, now we had a flat quarter, we’re projecting growth for next quarter,” Chambers said. “I talked to a large number of our shareholders, I talked to a large number of the buy and sell side analysts last night, they believe we’re managing the company extremely well.”