Cisco's planned cuts of $1B could cost thousands of jobs
Posted May 11, 2011 4:23 p.m. EDT
Updated May 12, 2011 8:01 a.m. EDT
Research Triangle Park, N.C. — 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.