Cisco Systems has said it will now cut 5,500 jobs or 7 percent of its total workforce starting next quarter, as the company continues to witness sluggish demand for its traditional lineup of switches and routers from telecom carriers and enterprise customers.
Earlier there were rumours that the company may lay off about 14,000 employees, or nearly 20 percent of the network equipment maker's global workforce. However, that the company has announced a lesser number should come as a major relief.
This could be the second biggest job cut after Intel's 12,000 that happened in April this year.
Cisco has said savings from up to 5,500 job cuts would be reinvested into key growth areas as the gear maker now shifts its focus from its legacy hardware towards higher-margin software business.
However, the layoff plan may also hit Indian shores as well, with the country accouting for 11,000 or 15 percent of its total workforce of 70,000 employees as of 30 April.
According to a Times of India report, Cisco's R&D establishment in India, which has 7,000 engineers, could be significantly impacted. In fact, India's R&D centre is the biggest outside Cisco's San Jose facility, which has about 12,500 engineers.
"The DNA is still of physical routers and switches. So it will have to let go of some of those people and bring in fresh talent with expertise in cloud and subscription software," ToI said quoting an industry source.
Vishal Tripathi, research director in Gartner, has told the TOI that companies like Cisco are increasingly focusing on a software-defined business and making big strides in the cloud ecosystem, ToI reported.
Revenue at Cisco's routers business fell 6 percent in the fourth-quarter ended July 30, while switching unit revenue was up 2 percent. Orders from service providers fell 5 percent, while revenue in emerging markets fell 6 percent, Cisco said.
The company has projected flat revenue in the first quarter and gave an earnings forecast that was shy of analysts' estimates, saying it expected adjusted earnings of 58 cents to 60 cents per share, versus Wall Street estimates of 60 cents.
Chuck Robbins, CEO, who took over from John Chambers in July last year, has been steering Cisco toward more software and subscription-based services.
Security, which Robbins said was the top priority of all its customers, posted a revenue gain of 16 percent in the quarter.
Gross and operating margins also improved in the fourth quarter, reflecting cost savings, Cisco said.
Cisco's fourth-quarter net profit rose to $2.81 billion, or 56 cents per share, from $2.32 billion, or 45 cents, a year earlier. Excluding items, the company earned 63 cents per share. Revenue fell 1.6 percent to $12.64 billion.
The company is also also betting on acquisitions to fast-track growth, and has made 10 acquisitions since Robbins began as CEO, according to FactSet StreetAccount data, from Internet-of-Things startup Jasper Technologies to cloud security provider CloudLock.
With inputs from Reuters
Updated Date: Aug 18, 2016 12:00 PM