Cisco Preps for LayoffsCisco Preps for Layoffs

Cisco Systems Inc. (Nasdaq: CSCO) is definitely going to have layoffs this year.

"It is not something we take lightly, and we will communicate exactly what these decisions will mean to our employees by the end of summer," said Gary Moore, Cisco's chief operating officer, speaking on Wednesday's earnings call.

The cuts are going to affect Cisco worldwide and will include full-time and contract workers. Specifics won't be determined until Cisco sees how its early-retirement offer is going.

Moore's presence on the call was unusual to begin with, and he got to speak before Cisco executives went into the usual financial details of an earnings call. It just shows that the reorganization is the headlining item at Cisco these days; the company had to know that layoffs would be one of the top topics of discussion if executives didn't bring it up.

For its third quarter, which ended April 30, Cisco reported profits that beat expectations but were still down from last year's. (See Cisco Reports Q3 and Cisco's Profits Shrink in Q3.)

And things won't recover right away. Cisco expects revenues for the fourth quarter, which ends in July, to be $10.8 billion to $11.1 billion, barely higher than last year's fourth quarter. Analysts polled by Thomson Reuters were expecting $11.6 billion.

In introductory remarks, Chambers tried to convince investors that he's addressing what are now considered systemic problems. He reiterated, for instance, that Cisco is simplifying its management structure, scuttling the councils and boards that many (outside and inside Cisco) found confusing.

Switching, a franchise area for Cisco, continues to be a problem. Switching revenues fell 9 percent compared with last year's third quarter, partly due to a clumsy customer transition to the Nexus 7000 from the flagship Catalyst 6500. Cisco is hoping a recently announced batch of switches will right things.

Moore said Cisco is reconsidering its product lines and will cut more products -- including some tradeoffs as Cisco tries to preserve both short- and long-term prospects. So far, in addition to Flip, Cisco has killed off some of its weaker products in home networking.

But home networking, in general, remains part of Cisco's overall video vision. While taking the heat for areas such as switching (where third-quarter revenues were down 9 percent compared with last year), Chambers unapologetically said Cisco will stick to its video strategy, including the home network and next-generation set-top boxes.

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— Craig Matsumoto, West Coast Editor, Light Reading