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UPDATE 1-Cisco to cut 5,500 jobs in shift away from switches, routers

UPDATE 1-Cisco to cut 5,500 jobs in shift away from switches, routersUPDATE 1-Cisco to cut 5,500 jobs in shift away from switches, routers

(Adds details, shares)

Aug 17 Cisco Systems Inc said it would
lay off up to 5,500 employees, or nearly 7 percent of its
workforce, as the world’s largest networking gear maker shifts
focus to areas such as security, Internet of Things and cloud.

Cisco’s traditional business of switches and routers has
been struggling with sluggish demand from telecom carriers and
enterprise customers and intense competition from companies such
as Huawei and Juniper Networks Inc.

Revenue in the company’s traditional routers business fell 6
percent in the fourth-quarter ended July 30, while switching
unit revenue was up 2 percent.

Chief Executive Chuck Robbins, who took over from John
Chambers in July last year, has been steering the company toward
more software and services businesses.

Revenue in Cisco’s security business, which offers firewall
protection as well as intrusion detection and prevention
systems, rose 16 percent.

Cisco, which is also betting on acquisitions to bolster its
faster-growing businesses, has made 10 acquisitions since
Robbins took the helm, according to FactSet StreetAccount data.

These deals range from internet-of-things startup Jasper
Technologies to cloud security provider CloudLock.

Cisco’s net profit rose to $2.81 billion, or 56 cents per
share, in the fourth quarter, from $2.32 billion, or 45 cents
per share, a year earlier.

Excluding items, the company earned 63 cents per share.

Revenue fell 1.6 percent to $12.64 billion.

Analysts on average had expected a profit of 60 cents and
revenue of $12.58 billion, according to Thomson Reuters I/B/E/S.

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Cisco, which expects to start laying off employees from the
first quarter, said it will take a charge of about $325 million
to $400 million in the quarter. On the whole, the company
expects a pre-tax charge of $700 million.

Technology news site CRN, citing sources close to the
company, reported on Tuesday that Cisco planned to lay off about
14,000 employees, or nearly 20 percent of its workforce.

Cisco’s shares were down 1.2 percent at $30.38 in
after-market trading on Wednesday.

The shares had gained 13.2 percent this year through
Wednesday’s close, compared with the 6.8 percent increase in the
broader S&P 500 index. (Reporting by Arathy S Nair and Anya George Tharakan in
Bengaluru; Editing by Sriraj Kalluvila)

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