Published On: Tue, Aug 8th, 2017

Cisco Systems to cut 5,500 jobs after reporting 2% drop in revenue

About 7% of global workforce to go, as networking company moves away from hardware to focus on software and cloud technology

Cisco Systems is to cut about 5,500 jobs, representing nearly 7% of the US technology companys global workforce.

The worlds largest networking gear maker, based in San Jose, California, announced the cuts on Wednesday night as part of a transition from its hardware roots into a software-centric business.

The job cuts came as the company, which employees about 73,000 people worldwide, warned of a challenging macro environment despite reporting a 21% increase in net quarterly profits to $2.81bn. Revenue fell to $12.64bn from $12.84bn in the quarter to 30 July.

Cisco said it was making the job cuts in response to the changes big businesses are making in how they operate and shift IT from clunky hardware to online cloud computing.

Todays market requires Cisco and our customers to be decisive, move with greater speed and drive more innovation than weve seen in our history, the firm said. Today, we announced a restructuring enabling us to optimize our cost base in lower growth areas of our portfolio and further invest in key priority areas such as security, IoT, collaboration, next generation data center and cloud.

The company, did not state where in the world the job cuts would mostly fall, but promised to reinvest substantially all of the cost savings into its future growth areas aggressively. The jobs losses, which will cost Cisco about $700m in termination payments, will being early in 2017.

Cisco is the second big technology company to announce big job cuts this year, following Intels plan to axe 12,000 jobs announced in April.

Ciscos cuts were much more modest than had been rumoured earlier on Wednesday in a report on the technology news site CRN stating that 14,000 jobs would be cut.

The companys shares fell 1% in after hours trading in New York to $30.42.

In November 2015, the company opened new offices in the UK, based near Londons Silicon Roundabout tech cluster, after promising to invest more than $1bn (770m) in the UK over the next three to five years.

The new London site, which created more than 200 jobs, is one of six Cisco has in Great Britain, with a combined headcount of up to 7,000 employees. The company says the UK is its second largest market.

Cisco has been investing in new products such as data analytics software and cloud-based tools for data centres to offset the impact of sluggish spending by telecom carriers and enterprises on its main business of making network switches and routers.

Founded in 1984, Cisco is traditionally known for its enterprise networking hardware: the huge racks of computer and telecoms switches and routers that form the backbone of the networked world.

But the profit margin on such hardware has been eaten away by commodity providers such as Taiwans Edimax Technology, forcing Cisco to seek greener pastures elsewhere. As part of its UK investment, Cisco is putting $150m into internet of everything startups, the companys name for its attempt to gain a foothold in the burgeoning internet of things sector.

Read more: https://www.theguardian.com/technology/2016/aug/17/cisco-systems-to-sack-fifth-of-global-workforce-says-report

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Cisco Systems to cut 5,500 jobs after reporting 2% drop in revenue