Cisco's planned cuts of $1B could cost thousands of jobs

Posted May 11, 2011
Updated May 12, 2011

— Cisco Systems Inc. (Nasdq: CSCO), the world's largest maker of computer networking gear, said Wednesday that it's set to eliminate thousands of jobs as part of cost-cutting moves to get profits growing again.

The company employs more than 73,000 people worldwide. Its second-largest operation outside its California headquarters is in Research Triangle Park.

Cisco's sales rebounded from the recession, but then started stalling in the middle of last year. In the past few months, CEO John Chambers has signaled that he's accepting long-standing criticism that the company is trying to compete in too many markets. He has vowed to radically simplify the company.

"There are no excuses, we must adjust quickly," Chambers said. "We are, and we will."

The networking giant has eliminated 550 jobs and stopped making the pocket-sized Flip video camera while also reorganizing some business units. Cisco also announced an early retirement program.

The company is still troubled: On Wednesday, it gave a financial forecast for the current quarter that was well below analyst expectations.

Chambers now wants to cut annual expenses by $1 billion, or about 6 percent. He didn't say how many jobs he's aiming to eliminate. If the percentage is similar to the cut in expenses, it could amount 4,000 to 5,000 employees. The company employs more than 4,000 people at its campus in RTP.

For the fiscal third quarter, which ended in April 30, Cisco said net income declined nearly 18 percent, earning $1.8 billion, or 33 cents per share. That compared with earnings of $2.2 billion, or 37 cents per share, a year ago.

Excluding the cost of stock-based compensation and some amortization and asset impairments, earnings were 42 cents per share, unchanged from last year. Analysts polled by FactSet had expected earnings of 37 cents per share on that basis.

Sales rose 5 percent to $10.9 billion, matching analyst expectations.

This year's third quarter was one week shorter than last year's.

For the current quarter, Cisco expects earnings of 37 cents to 39 cents per share, while analysts were expecting 42 cents per share. It expects revenue to be unchanged from last year or up to 2 percent higher, analysts were looking for a 7 percent increase.

Cisco shares fell 28 cents, or 1.5 percent, to $17.50 in extended trading.


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  • neal_Durham May 12, 2011

    Who wrote this? WRAL you really need to check your standards, there's a lot of assumption and speculation in this. The only two facts that John Chambers released were that Cisco is taking $1 Billion of expenses out of the company and that there will be a headcount reduction. There was no mention of how many individuals and whether or not those would be full time employees or contractors. Not to mention that this expense reduction could also target operational expenses. There was absolutely no need to alarm the local community by stating that nearly 5k employees would their jobs. Love the journalistic integrity here...

  • Keepin_it_real_in_NC May 12, 2011

    "How's them stale talking points and having no hope to change who's gonna win the WHITE House in 2012? "

    Too funny. Obama has been revealed to be an empty suit. The luster is gone. His poll numbers are in the low 40s. Gas is almost $4/gallon. He started another war. He's ran up the deficit. Yep, keep on drinking the kool aid.

  • SARCASTICLES May 12, 2011

    Fine, thank you....How's them stale talking points and having no hope to change who's gonna win the WHITE House in 2012? ;)

  • Keepin_it_real_in_NC May 12, 2011

    How's that Hope and Change working out for y'all?

  • ncguy May 12, 2011

    They did it to themselves, over priced hardware, ridiculous cost on maintenance contracts, firmware upgrades every week it seemed and you had to Pay big for them if not on contract.

    Well at least they won't have to fire Brad Cooper...

  • RB aka Spirit Warrior Woman May 11, 2011

    "What say you Bev, can you still save us?"

    And where are those NEW JOBS you and Obi promised while campaigning to CREATE once you got into office???


  • No Party Affiliate May 11, 2011

    Take those incentives and the employees laid off and create a startup business.

  • Bring on the 4 Dollar Gas May 11, 2011

    Ooops, Bev didn't count on this one. Looks like adding 12 and 15 jobs once in a while is really going to get pounded with this body count.

    What say you Bev, can you still save us?

  • randrmomanddad May 11, 2011

    And We Give Them Big Time Incentives Because....????

  • bsutton May 11, 2011

    I hate to see people lose their jobs, however it is kinda good to see pushy, high pressure arrogance rewarded.

    down east