Cisco Announces Big Layoffs, Offers Tepid Forecast

Networking equipment maker Cisco Systems, Inc. (NASDAQ:CSCO) will lay off 7% of its workforce in an effort to return to growth, the company said amid its latest earnings report.

The San Jose-based company reported adjusted fiscal Q4 EPS of $0.63, beating analyst estimates for $0.60. Revenue fell 1.6% from last year to $12.64 billion, also exceeding Wall Street’s view of $12.57 billion.

Looking ahead, CSCO forecast fiscal Q1 EPS ranging from $0.58 to $0.60, which could miss analysts’ estimate of $0.60. Revenues are expected to fall 1% from the prior year, which would also fall short of Wall Street’s $12.49 billion projection.

The biggest news coming out of the earnings report was Cisco’s impending layoffs. “The restructuring will eliminate up to 5,500 positions, representing approximately 7 percent of our global workforce, and we will take action under this plan beginning in the first quarter of fiscal 2017,” the company said. Previous projections pegged the potential layoffs at nearly triple that amount.

From the press release:

“We had another strong quarter, wrapping up a great year. I am particularly pleased with our performance in priority areas including security, data center switching, collaboration, services as well as our overall performance, with revenues up 2% in Q4 excluding the SP Video CPE business,” said Chuck Robbins, CEO of Cisco. “We continue to execute well in a challenging macro environment. Despite slowing in our Service Provider business and Emerging Markets after three consecutive quarters of growth, the balance of the business was healthy with 5% order growth. This growth and balance demonstrates the strength of our diverse portfolio. Our product deferred revenue from software and subscriptions grew 33% showing the continued momentum of our business model transformation.”

Cisco shares were mostly flat in aftermarket trading on Wednesday at $30.72. CSCO has gained 13% year-to-date, nearly doubling the performance of the S&P 500 during the same period.


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