Service Provider Cloud

Cisco Cutting 1,100 More Jobs, Forecasts Revenue Decline

Cisco is still transforming itself from a networking gear company to a provider of cloud computing and other IT services. However, there are more rough times ahead as it plans to cut another 1,100 jobs, while forecasting another quarterly loss.

The company revealed the job cuts during its third-quarter financial results, which it released on May 17. These cuts are in addition to the 5,500 positions Cisco eliminated during a restructuring plan that started in August 2016. (See Cisco Set to Cut 14,000 Jobs – Report.)

In his comments to analysts on Wednesday, CEO Chuck Robbins said that he still believes in the company's plans to move more toward cloud, security, analytics, Internet of Things and software and that the strategy will pay off in the next three to five years as its customers look to strengthen their networks.

"As our customers add billions of new connections in the years ahead, the network will become more critical than ever. They will be looking for intelligent networks that deliver automation, security and analytics to help them derive meaningful business value from these connections," Robbins said. "These will be delivered through a combination of new platforms, as well as software and subscription-based services, which we have been focused on accelerating over the last 18 months."

To highlight this trend, Robbins pointed to the recent Wannacry ransomwear attack and what Cisco has been doing to combat it on the network level. (See WannaCry Continues at a Slowed Pace.)

(Source: Cisco)
(Source: Cisco)

However, Robbins and CFO Kelly Kramer noted that with some of the wins Cisco has had with cloud, there are macro issues the company faces, including slower spending by the US federal government, as well as switching from selling hardware to selling software and subscriptions.

During the quarter, software and subscriptions increased 57%, but service provider revenue dropped by about 30%. The routing and data center segments also slipped.

For its third financial quarter, Cisco reported revenue of $11.9 billion, a 1% decrease from a year ago. The company posted non-GAAP net income of $3 billion or $0.60 earnings per share. GAAP income totaled $2.5 billion or earnings per share of $0.50.

Wall Street analysts were expecting $0.58 per share and revenue of $11.89 billion, according to Reuters.

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However, it was Cisco's guidance for its fourth financial quarter that sent its stock falling during afterhours trading. The company is calling for a revenue decline of 4% to 6% year-over-year and non-GAAP earnings of $0.60 to $0.62.

In the weeks leading up to Wednesday's financial results, Cisco embarked on a buying spree, acquiring companies that help fill in various gaps in its portfolio. Robbins said that he expects the company will continue to invest.

The biggest deal during the quarter was a $610 million agreement for SD-WAN specialist Viptela, which complements Cisco's existing IWAN and Meraki SD-WAN services. (See Cisco Looks to $610M Viptela Acquisition to Simplify SD-WAN.)

Cisco also plunked down $125 million for MindMeld, an artificial intelligence specialist, as well as an undisclosed amount for some of the analytics assets of Saggezza. (See Cisco Buys Analytics Assets From Saggezza.)

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— Scott Ferguson, Editor, Enterprise Cloud News. Follow him on Twitter @sferguson_LR.

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[email protected] 5/27/2017 | 5:04:55 PM
Re: cuts Very funny but they may still reinvent themselves many would have said Apple was dead in the 90's and Microsoft was King. Now the tables have turned. Turnaround can be achieved its just not easy to turn the ship.
kq4ym 5/25/2017 | 3:48:44 PM
Re: cuts Things may look gloomy at Cisco to many with the news coming out. Restructuring and the" 5,500 positions Cisco eliminated during a restructuring plan that started in August 2016," will probably not be giving employees and sense of health there. Even the photo of Cisco's logo on the sign on this story looks very much like a tombstone ironically, just without the birth and death dates!
[email protected] 5/22/2017 | 5:25:10 PM
Re: cuts Michelle yes its usually a combination but they leave the organization with both a lack of long-term knowledge and a moral problem sometimes retraining can be an option to address bot the need for evolution and cost management.
[email protected] 5/22/2017 | 5:18:04 PM
Re: cuts Yes, Scott, it is sometimes a tough transition from hardware to software but if someone is willing I think they should be offered the retraining option. There is also something to be said for employees that have some long-term understanding of the company.
Michelle 5/20/2017 | 10:42:36 PM
Re: cuts @maryam I can imagine they're both cutting lower performers and moving some folks around. I would guess the bottom line will be helped a bit by some of the cuts.
danielcawrey 5/20/2017 | 9:07:45 PM
Re: cuts I think it's still safe to be positive on Cisco's long-term outlook.

The company has weathered some serious storms in the past. In addition, it's really good at acquiring companies and assimilating them - that's not easy. But gives me an impression they will come out of this a better company. 
Scott_Ferguson 5/19/2017 | 9:10:44 AM
Re: cuts @maryam: It is true that many times people are rehired, but they have to have the right skill sets. The issue is that much of Cisco, like the other parts of the industry, is still hardware based and with less jobs in hardware, it can be tricky. Oracle, IBM and Microsoft are going through the same thing. And yes, these companies should do more to put people in growth positions instead of cutting. 
Scott_Ferguson 5/19/2017 | 9:08:38 AM
Re: cuts @PhilBritt: All good points, and as far as automation goes, it's very unclear if XX amount of jobs can be replaced. However, some of the studies out there show that AI can take over a number of different position, even those once considered highly skilled. Here's one that shows it: http://www.enterprisecloudnews.com/author.asp?section_id=571&doc_id=732689&
[email protected] 5/18/2017 | 10:50:03 AM
Re: cuts Scott it's a great point they should report net hires. We can only hope that some of those people were placed in other positions but with the evolution does come to some necessary cuts, when skill sets are not transferable there is often little choice. It would be great if organizations offered to retrain to those interested but often times it's simply a bottom line issue or a way of moving out less desirable employees.
Phil_Britt 5/18/2017 | 10:21:20 AM
Re: cuts Even though some are likely to be moved, even "good" jobs are susceptible to automation. Another issue is that, thanks in part to automation, the U.S. workforce continues to become more productive. But productivity gains, while leading to lossses of some positions, don't always result in higher salaries for others.

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