Cisco plans job cuts, drops growth target

12.05.2011
Cisco Systems plans to eliminate jobs as it focuses in on core businesses such as routing and switching, the company's executives said on Wednesday after announcing an 11 percent decline in third-quarter profit.

The financial report was the first since Chairman and CEO John Chambers and renew its focus on core businesses such as routing and switching. In addition to disclosing the job cuts, Cisco said it was abandoning a standing goal of achieving year-over-year revenue gains between 12 percent and 17 percent each quarter.

Cisco has extended itself into too many businesses and faces growing competition on its home turf, especially in network switches, Chambers has warned. At the same time, the public sector, a particularly important market for Cisco, has been cutting spending in all parts of the world, he said on Wednesday.

Along with , with revenue up less than 5 percent from a year earlier, Cisco estimated that revenue in the current quarter would be flat or up less than 2 percent.

The job cuts are beginning with a recently announced early retirement program, said Gary Moore, the company's newly appointed chief operating officer, who is directing a program to cut US$1 billion out of Cisco's annual operating expenses over the next year.

"To be clear, we do anticipate a workforce reduction on a global basis, affecting both our full-time and contractor workforce," Moore said. Cisco won't say more until after employees are informed around the end of summer, typically defined as August or September. The job cuts themselves will create one-time costs of $500 million to $1 billion, Cisco said.