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In Latest Restructuring, Cisco Will Cut 6,000 Jobs

Four years, four restructurings.

Networking giant Cisco Systems will embark on its fourth restructuring in as many years, saying Wednesday it will lay off as many as 6,000 people, amounting to about eight percent of its 74,000-strong work force. The cuts are the largest since it began a series of restructuring actions in 2011.

CFO Frank Calderone announced the layoff plan during a conference call with analysts. He said Cisco expects to take a restructuring charge of as much as $700 million, and as much as half of that will come during the quarter ending in October.

The news came after Cisco reported quarterly earnings that beat the estimates of analysts. Its per-share profit in the fourth quarter was 55 cents on $12.4 billion in sales. The results were better than the 53 cents on $12.1 billion in revenue that had been expected. Cisco shares fell by more than by 30 cents, or more than one percent, in after-hours trading after closing up slightly during the regular session.

For the full year, sales fell three percent to $47.1 billion, and earnings for the year were $2.06 per-share on a non-GAAP basis.

In a statement, CEO John Chambers sounded a positive tone: “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 center, software, cloud and Internet of everything. Our strategy is sound, our financials are strong, and our market leadership is secure. We have the team in place to deliver and are uniquely positioned to help our customers solve their biggest business problems.”

News of the previously rumored layoffs was left for the conference call with analysts.

Update: Looking ahead, Chambers said Cisco expects sales in the first quarter of 2015 to be “flat to up one percent.” And business in international markets continues to be weak. Chambers said that business in emerging markets declined. Orders in what Cisco calls the “BRICM” countries — Brazil, Russia, India, China and Mexico — fell by double digits, and he said that the company doesn’t expect those markets to return to growth “for several quarters.” After those markets, orders in the next 15 largest countries declined by nine percent, he said. The main problem appeared to be in the service provider video market, where sales declined by 13 percent.

There was growth, but as has been the case for Cisco recently, it was in a sector that accounts for a relatively small part of Cisco’s overall business. The data center business grew by 30 percent to $772 million in the quarter, while the security business grew 29 percent to $447 million.

In the larger business segments, switching sales fell four percent to $3.7 billion, and routing fell seven percent to $1.9 billion. Service provider video fell 10 percent to about $1 billion. Services revenue grew five percent to $2.8 billion.

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