Cisco to Lay Off 1,100 More Workers--Update
May 17 2017 - 5:53PM
Dow Jones News
By Anne Steele
Cisco Systems Inc. said it would lay off another 1,100 employees
and forecast a drop in quarterly revenue as the networking company
contends with market shifts, including customers favoring software
over hardware.
The fresh round of cuts expands a previous restructuring plan
announced last August that was designed to cut 5,500 jobs, or 7% of
Cisco's workforce at the time. According to a company filing,
Cisco's head count as of Jan. 28 -- amid the first round of cuts --
was 71,959.
Shares of Cisco fell 8.3% to $31 after hours as the company also
said revenue ticked down in the fiscal third quarter and would drop
more sharply -- by 4% to 6% -- in the fourth quarter.
Cisco, which disclosed the layoffs in its quarterly earnings
report, said it has booked charges of $614 million during the first
nine months of the fiscal year and expects to book $150 million to
$200 million more during the fourth quarter.
Cisco Chief Executive Chuck Robbins is trying to shift the
business from hardware to software and services. The company is
making gains in areas such as security, but it faces weak customer
spending in its core networking hardware businesses.
Cisco has seen steep drops in revenue in its service provider
video business, including a 30% revenue decline in the latest
quarter. That followed a 41% drop in revenue for that business in
the second quarter, which ended in January. Last year, the company
had benefited from a national program in China rolling out video
set-top boxes to Tier 2 and Tier 3 cities. Although Cisco set-top
boxes weren't used, the company provided the smart cards for those
boxes for secure access.
"It was very, very high margin," said Chief Financial Officer
Kelly Kramer, in a conference call with investors in February. But
that program had "dramatically" slowed down, she said.
Cisco spent about a decade trying to build its service provider
video business after it announced in 2005 it would acquire
Scientific-Atlanta Inc. for $6.9 billion. In November 2015, the
Silicon Valley giant sold that business, which it called Connected
Devices, to Technicolor for $600 million in stock and cash.
At the time, Cisco said video would continue to be part of its
strategy in cloud and software-based services but that the
Connected Devices business required a new approach to business
strategy, organization and investment.
For the quarter ended in April, Cisco's revenue edged 0.5% lower
to $11.94 billion, as a decline in service revenue more than
outweighed a modest uptick in product revenue. The company earned
$2.52 billion, or 50 cents a share, up from $2.35 billion, or 46
cents a share, a year ago. Excluding certain items, adjusted
earnings rose 3 cents to 60 cents a share.
Analysts polled by Thomson Reuters were looking for an adjusted
58 cents a share on $11.89 billion in revenue.
Total operating expenses were 8.2% lower from a year ago as the
company spent less on research and development, sales, marketing
and overhead.
For the final quarter of the fiscal year, Cisco said it expects
adjusted profit of 60 cents to 62 cents a share, compared with the
average analyst estimate of 62 cents.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
May 17, 2017 17:38 ET (21:38 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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