Cisco to cut 5,500 jobs in shift away from switches, routers

By REUTERS
August 18, 2016 01:25
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SAN FRANCISCO  - Cisco Systems Inc said it would cut nearly 7 percent of its workforce, posting charges of up to $400 million in its first quarter, as the world's largest networking gear maker shifts focus away from its legacy hardware towards higher-margin software.

The gradual move to fast-growing sectors such as security, the Internet of Things and the cloud is a response to sluggish demand for Cisco's traditional lineup of switches and routers from telecom carriers and enterprise customers, amid intense competition from companies such as Huawei and Juniper Networks Inc.

Revenue at the company's routers business fell 6 percent in the fourth-quarter ended July 30, while switching unit revenue was up 2 percent. Orders from service providers fell 5 percent, while revenue in emerging markets fell 6 percent, Cisco said.

Cisco projected flat revenue in the first quarter and gave an earnings forecast that was shy of analysts' estimates, saying it expected adjusted earnings of 58 cents to 60 cents per share, versus Wall Street estimates of 60 cents.

"We're uncertain how to model any improvement in those two (segments) in particular going forward," Chief Executive Chuck Robbins told analysts during a call, speaking of service providers and emerging markets.

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