Cisco (Nasdaq: CSCO) reported a positive fourth quarter with revenues rising 6.2 percent year-over-year to $12.4 billion, but the company's CEO John Chambers said that the market is not recovering fast enough and it will have to cut costs.
Chambers (Image source: Cisco)
"What we see is slow steady improvement, but not at the pace we want," Chambers said during the company's earnings call.
As a result, the vendor will lay off 4,000 employees, or about 5 percent of its workforce. By conducting these job cuts, the vendor said that the cuts would drive up to $550 million in pretax charges.
News of the job cuts did not sit well with investors as the vendor's stock dropped 9.5 percent to $23.88 in after-hours trading on the Nasdaq stock exchange.
This is not the first time Cisco has taken out the axe. In 2011 the vendor cut 6,500 workers, or 9 percent of its employee base. Besides cutting jobs, the vendor also shed non-core businesses, shutting down its Flip camera business and selling its Linksys home networking unit to Belkin.
From a regional and product segment perspective, results were a mixed bag.
While the Americas region rose 5 percent, sales in Asia and China declined 3 and 6 percent, respectively.
In the product segment, the switching and service provider video units were the stars, rising 5 and 23 percent to $3.8 billion and $1.2 billion. Another bright spot in its portfolio was data centers, which rose 43 percent to $593 million. However, its flagship routing business remained flat at $2.1 billion.
The company's net profit for three months to 27 July was $2.3 billion, or 42 cents per share, up 18.4 percent from $1.9 billion or 36 cents per share in the same period a year ago.
Cisco shares were listed at $24.53, down $1.85, or 7.01 percent in Thursday morning trading on the Nasdaq stock exchange.
- see the earnings release
- WSJ has this article (sub. req.)
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