U.S. group Cisco Systems (NASDAQ:CSCO) announced it will lay off 4,000 employees, which is 5 percent of its total workforce, citing the difficult economic situation.
Cisco profit rose 18 percent in May-July, the fourth fiscal quarter of the company, to $2.27 billion, or 42 cents a share while revenues were up 6 percent, to $12.4 billion. The net profit of the fourth quarter a year ago was $1.9 billion, or 36 cents a share.
Revenue for the last quarter of the fiscal year was up 6.2 percent to $12.4 billion. Adjusted quarterly earnings were 52 cents per share, close to the analysts’ predictions of 51 cents. Cisco shares were down 8.7 percent today on NASDAQ. “The stock has been on a great run, and expectations were high. People were expecting more,” said Brian Marshall, an industry analyst with ISI Group.
Cisco has 75,000 employees. John Chambers, Chairman of the Board and CEO of Cisco Systems said the layoffs are due to the disappointing pace of economic recovery, felt differently by the various sectors of the company. While orders in the Americas were up 5 percent in the quarter ended July 27, the contracts gained in Asia fell by 3 percent, with a decline of 6 percent in China, said Chambers.
Network equipment industry often feels trends in the economy earlier than other sectors of IT & C. Cisco’s results and comments about the economic situation are considered an early indicator of the direction of the IT industry.
“The environment in terms of our business is improving slightly but nowhere near the pace that we want. We have to very quickly reallocate the resources,” said Chief Executive Officer John Chambers on a conference call with analysts. He added that the “recovery is more mixed and inconsistent than the others I have seen.”
Cisco had another round of layoffs after the onset of the economic crisis. In 2011, the company began a redundancy plan for 6,500 employees, or 9 percent of the workforce at the time.
Reply