Networking giants Cisco Systems released a press statement on Wednesday informing layoff of another 1100 employees, given the drop in quarterly revenue forecast. According to the spokesperson, Cisco is facing stiff competition stemming from market shifts, where customers are favoring software over hardware. Cisco is one of the most popular IT hardware sectors that is dealing with routers, switches, and software service business. In the current period, the company is seeing a tremendous decline in their revenue as much as 6 percent from a year earlier.After this announcement, the shares of Cisco’s stock were sharply lower on Thursday.
Apart from Cisco lot of major Indian IT companies like Infosys, Wipro, HCL also announced layoff given the slowing market.
As far as Cisco the organization had gone through a restructuring plan in August last year announcing around 5500 job cuts, roughly 7% of the workforce at that point of time. The headcount of Cisco in January 2016 was approx. 71,959. Chuck Robbins, Chief Executive Officer, is trying to make a paradigm shift- from hardware (Cisco’s forte) to software and services. The company has gained ground in security systems but faces a weak customer base in its core networking hardware business. Shares of the company fell 7.4% to $31.33 in the third quarter with announcements that the fourth quarter results will go down further (4% to 6%).
Cisco, which announced the layoffs in its quarterly ‘earnings report, said it had booked charges of $614 million for the first nine months of the present fiscal year and is expecting to book $150 million to $200 million more during the last quarter.
In an interview, Robbins emphasized that he’s growing revenue related to software and subscription businesses. Wall Street tends to value more highly companies with mostly software and subscription revenue than hardware companies. “It took me several quarters to get the team to understand that we’re moving this way,” he said.
The company’s total operating expenses were down to 8.2% as compared to last year; Cisco said it expects the adjusted profit of 60 cents to 62 cents a share for the final quarter of the fiscal year.
Regarding layoffs, Robbins said that Cisco’s labor was higher than it was when the first round of layoffs was announced last August.
In the Americas, Cisco is facing stiff competition in the service provider and emerging markets, which worsened in the third quarter. In April Cisco revenue edged 0.5% to $11.94 billion in the quarter end and showed a decline in service revenue more than outweighed a modest uptick in product revenue. Moreover, the company earned around $2.52 billion which was up from $2.35 billion a year ago excluding certain items.