Cisco on Wednesday announced earnings for its fiscal fourth quarter that exceeded analyst expectations, but the news was still decidedly mixed, as CEO John Chambers announced plans to layoff 6,000 workers -- 8% of the company’s global workforce.
In a conference call with analysts, Chambers said Cisco is driving growth in many of its most promising product areas, including cloud, security, and software offerings. But he said the company continues to face "a tough environment" in emerging geographic markets and warned that business there might get worse over the next few quarters.
During the quarter, which ended July 26, Cisco recorded $12.36 billion in revenue, down slightly year-over-year, and $2.25 billion in net income, which was basically flat. The profit translated to 55 cents per share. Analysts had expected 53 cents per share, according to a survey conducted by Thomson Reuters. Cisco also outperformed analysts' revenue expectation of $12.14 billion. For the full year, Cisco took in $47.14 billion in revenue, down 3% compared to its fiscal 2013. Earnings per share for the year were up 2% on a non-GAAP basis, to $2.06.
The 6,000 job cuts are only the latest in a string of reductions at Cisco; prior to the latest announcement, the company had already laid off twice that many workers over the past few years. Chambers characterized the layoffs as a "limited restructuring." The company did not specify where the cuts would be made. He said savings from the eliminated jobs will be invested in projects with high growth potential, such as security and cloud products, and the Internet of Everything.
Chambers said that due to restructuring, Cisco will take a pre-tax charge of $700 million during fiscal 2015, with up to $350 million coming in the first quarter. He also estimated that revenue would be flat or modestly up in the first quarter, but that earnings would fall.
Cisco CEO John Chambers at CES in January
Cisco, whose financial performances have long been considered a bellwether for tech spending, has faced a number of challenges over the last year. Chambers argues that Cisco's integrated hardware-software offerings provide best-in-class performance, but more companies are embracing software-defined networks built on low-cost commodity hardware, for example. Cisco remains a major tech player, but with these software-savvy competitors gaining more traction, Chambers has faced pressure to adapt while maintaining healthy margins.
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