Cisco to cut 6000 jobs worldwide in FY2015

Cisco announced last week that it will cut up to 6000 jobs as part of a “limited” global restructure, to be undertaken in the 2015 financial year.

The company announced the cuts alongside its Q4FY14 earnings announcement, in which it revealed FY 2014 revenues of US$47.1 billion (GAAP figures) - a decrease of 3% from the previous financial year. Net income fell 21.3% from FY2013’s US$10 billion to US$7.9 billion.

In a statement accompanying a conference call on its earnings, Cisco’s chairman and chief executive officer John Chambers revealed the company has “plans to do a limited restructuring across several areas of our business”.

Chambers suggested the money saved from the job cuts would be redistributed into other areas of Cisco’s business.

“We expect to reinvest substantially all the cost savings from our restructuring actions in our key growth areas such as data centre, software, security, cloud, and others,” he said.

Frank Calderoni, Cisco’s executive vice president and chief financial officer, explained that the restructure will impact up to 6000 employees - about 8% of the company’s 74,042 global staff.

Calderoni said the restructuring is expected to occur in the first quarter of the company’s 2015 financial year and that the company expects to recognise pre-tax charges of up to US$700 million in FY2015. Approximately US$250 to US$350 million of the charges are expected to be recognised in Q1FY15, with the remainder to be recognised later in FY15.

According to the WSJ, Chambers declined to say which areas would be targeted by the cuts until affected employees are informed, but he did acknowledge that examples of cuts could include sales reps in countries where revenues are shrinking.

“We are unable to release numbers by region or country at this time,” the BBC reported the company as saying.

According to the BBC, Cisco said it would continue to hire people throughout the layoffs, while the WSJ reported Chambers as saying that cutting employees in declining business areas will allow Cisco to add skills in other business units that are growing.

“We will exit this year pretty much with the same number of people we started the year with,” the WSJ quoted Chambers as saying. “Some groups will not be affected at all. Others will.”

Reuters’ figures say Cisco has cut over 17,000 jobs in the last four years. Despite these cuts, various acquisitions have seen Cisco’s headcount actually grow from about 71,000 in 2011 to around 74,000, according to the news service.

Earnings

Bloomberg reported that the job cuts come as Cisco forecasts little to no revenue growth in the current quarter.

In revealing Cisco’s Q4 figures, Chambers said: “We are executing well in a tough environment and delivered our best non-GAAP earnings per share quarter in our history. I’m pleased with how we are transforming our company over the past several years and that journey continues.

“We are focused on growth, innovation and talent, especially in the areas of security, data centre, software, cloud and Internet of Everything,” he said.

The earnings announcement revealed Cisco’s 2014 fourth quarter did not differ much from its FY2013 fourth quarter: revenues fell 0.5% to US$12.4 billion, while net income fell 1% to US$2.2 billion.

Cash flows from operations reached US$3.6 billion in Cisco’s Q4FY2014, up 12.5% from Q3’s US$3.2 billion but down 10% from the previous fiscal year’s fourth quarter.

Looking at the entire 2014 fiscal year, cash flows from operations fell 4.7% from FY2013’s US$12.9 billion to US$12.3 billion.

Image courtesy Alex Schwenke under CC