Cisco Systems will cut 6,000 more jobs, or about 8% of its global workforce, as the tech giant struggles for growth and continues to see specific parts of its business, including its service provider video unit, slump.
The coming cuts, announced Wednesday as the company announced fiscal fourth quarter results, arrive about a year after Cisco said it would lay off 4,000 workers. They also factor in roughly three years after Cisco announced plans to reduce its headcount by 6,500 jobs tied to a reorg aimed at slashing $1 billion in annual operating costs.
According to an 8-K filing, Cisco’s current wave of layoffs will start in the company’s first quarter, estimating that it will result in pre-tax charges of less than $700 million, consisting of severance and other one-time termination benefits. Between $250 million to $350 million of those charges will be recognized in the first quarter, the company said. Cisco ended the fourth quarter with 74,042 employees, down from 75,049 from a year ago.
Cisco’s service provider market was a sore spot in the company’s fourth quarter, as revenues in the category declined 11%. Taking a significant hit was service provider video, which brought in $1.06 billion, down 10% versus a year ago. That part of the business is coming under new leadership. In May, Cisco announced that former Cablevision Systems exec Yvette Kanouff was joining to head up its Service Provider Video Software and Solutions (SPVSS) organization.
“Our service provider customers are dealing with transitions in their own business and have been aggressively consolidating with the transaction volumes of these consolidations over the last 12 months about as much as we have seen in the past four years combined,” Cisco president and CEO John Chambers said Wednesday on the company’s earnings call.
Two major customers in that SP group -- Comcast and Time Warner Cable – are in the process of merging.
Echoing concerns voiced recently by Arris chairman and CEO Bob Stanzione, Chambers said such deals “tend to have temporary slowing effects…until they get their decisions together on how the networks come together where they make investments.”
Cisco is also encountering tougher sledding in emerging markets such as China, Brazil, Russia and Mexico.
On an overall basis, Cisco posted fourth quarter net income of $2.25 billion (43 cents per share), on revenues of $12.36 billion, down slightly from $12.4 billion in the year-ago period.
Growth will remain elusive for Cisco in the short term, as Chambers said he expects first quarter revenues to be flat to up 1%.
