Cisco Q4 strong; CEO Chambers confident, but job cuts loom

Cisco Q4 strong; CEO Chambers confident, but job cuts loom

Summary: CEO John Chambers noted that the company posted records for earnings and revenue and customers are seeing Cisco as an architecture partner. But to hit its numbers in the quarters ahead, Cisco will cut 4,000 employees.

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Cisco Systems delivered a strong fourth quarter as expected and CEO John Chambers added that his confidence in "our ability to be the #1 IT Company is increasing."

The company reported fourth quarter earnings of $2.3 billion, or 42 cents a share, on revenue of $12.4 billion. Non-GAAP earnings for the fourth quarter were 52 cents a share.

According to Thomson Reuters, Cisco is expected to report fourth quarter earnings Wednesday of 51 cents a share on revenue of $12.4 billion.

It's worth noting that Cisco estimates crept higher leading up to the results.

In a statement, Chambers noted that the company posted records for earnings and revenue and customers are seeing Cisco as an architecture partner.

On a conference call with analysts, Chambers said that Cisco is "leading many of the technology transitions in the market which are increasing in pace." These transitions put the network in the center of cloud, mobility, bring your own device and security.

Chambers added that Cisco's data center business grew revenue more than 40 percent in the fourth quarter. Enterprise sales were up 9 percent in the U.S., but in Asia Pacific, Japan and China orders were down 3 percent. Chambers said:

Along with economic challenges impacting several of our top five emerging markets, last quarter I described a continued slow recovery and I haven't seen anything to suggest that this dynamic will change in the short term. But this recovery is more mixed and inconsistent than the others I have seen.

For fiscal 2013, Cisco reported earnings of $10 billion, or $1.86 a share, on revenue of $48.6 billion, up 5.5 percent from a year ago.

As for the outlook, Cisco said it expects a "slow inconsistent recovery" with revenue growth of 3 percent to 5 percent in the year ahead. For the first quarter, Cisco expects non-GAAP gross margin to be 61 percent to 62 percent with earnings per share on a non-GAAP basis to be 50 cents a share to 51 cents a share.

Wall Street is expecting first quarter earnings of 51 cents a share on earnings of $12.45 billion.

To hit its numbers, Cisco said it will lay off 4,000 workers or 5 percent of its global workforce.

Why would Cisco cut jobs when it's performing well. Chambers said it's all about speed and quick decisionmaking as well as sticking to its financial model. Chambers explained:

The environment in terms of our business is improving slightly but nowhere near the pace that we want. You know what product orders have done minus the acquisition and spinouts because that gives you a feeling for what our growth is going to be and those will bump them up or down. It's just not growing at the speed we want. The inconsistency of global GDP growth and lots of time you see northern Europe start to get stronger, you see the issues in emerging markets start to get softer. You see us successful in one category switching and you see us not as successful except in the edge in terms of the routing.

Now if we are going to lead in this industry, the one thing I have learned over the years is you have to be the first mover. We have to very quickly reallocate the resources. A fair amount of that 4,000 people will be allocated to new growth opportunities.

We were very pleased with how we have made progress the last two years on speeding up decisions and today's marketplace---they are almost up exponentially on how quickly not only decisions have to be made but how quickly you implement those. Those need to be done with small teams. We just have too much in the middle of the organization.

It's all about speed of pace in this new industry which we intend to balance. We make commitments on a financial model which we are absolutely sticking to...Every well-run business in the world grows and keeps business expenses in line...This is just good business management and I have learned in this industry you lead with your mind, not with your heart.

The networking giant had $50.6 billion in cash, equivalents and investments at the end of the quarter.

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By the numbers:

  • Cisco spent $5.94 billion on research and development in fiscal 2013.
  • Fourth quarter product revenue was $9.74 billion, up from $9.15 billion a year ago. Service revenue was $2.68 billion, up from $2.54 billion a year ago. .
  • Inventory as of July 27 was $1.48 billio, down from $1.66 billion a year ago.

 

Topics: Networking, Cisco, Data Centers

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  • Cisco Q4 strong; CEO Chambers confident, but 4,000 job cuts loom

    Boy that's the kind of Company you want to work for, now isnt it?
    Over and Out
  • Greed.

    All those profits and still laying off people. Simple Greed.
    butter44
    • Re: All those profits and still laying off people. Simple Greed.

      Should they wait until the company is circling the plughole, and the SEC is pursuing charges against the top execs for criminal management?
      ldo17
    • RE: Greed

      I guess that is the only thing that matters now is stocking piling cash and destroying the middle class. Personally speaking though, if they keep doing this to the people their company is going to crash because well no one will have any money to buy tech stuff when they are making less money and food, gas and heat/cold are more important.

      Also, by these people getting greedy and hoarding all the money will decrease the value of the US Dollar, look at it this way, if the middle class are losing dollars then we are not able to buy products made here and especially overseas. So if we're not able to buy a lot of stuff from overseas they will look at us as bad customer and degrade our currency against theirs. Simple math
      aja-allen
      • Greedy -- Are you serious?

        Do you have any idea how the economy works and did you even read the article? The fact is that they are not reducing their workforce but are changing priorities, refocusing on areas of technology that are growing. John Chambers even said, in his address that as many of those employees that can be moved into other positions will be.

        The fact is that when you work in technology you must stay current in technology, those that find themselves experts in outdated technology are always at risk for being left behind, and while I feel for them, Cisco offers its employees far more training opportunities than most other companies.

        As an industry leader, there are never enough peoe to fill the roles of qualified technologists, engineers, and leaders. The reason people will lose their jobs is because they were unable to transition into roles that are needed. A person doesn even need to jump from a dying technology to a brand new one, but what they bring to the table must be relevant.

        Cisco routinely cuts jobs in poor performance product areas, if they didn't they would not be successful and would not be able to provide as many jobs, or the quality products they provide today.

        And greed? Are you kidding me? Aside from the fact that Cisco is an organization owned by its shareholders and it is John Chamber's full time job to make sure investors see returns, we live in a capitalist society! Large corporations do not exist for their employees, EVER, they exist for their shareholders. Why do you think Cisco has built its major complexes in North Carolina and Texas? it is because these states do not have the unions and other types of restraints that run large corporations out of states (and untimately, countries). Do you thinm its an accident these stars were mot bit as hard during the recession and remain area thqt continue to thrive? When companies generate profit that profit is then reinvested into the economy in which it was generated (read; morr jobs). Investing in things (and people) that do not generate profit is not only poor business sense, it affects the economy in a negative way. I am not trying to sound heartless, as you said, it is just the math.

        Call the leadership of Cisco greedy if you like, but you have no ground to stand on -- given the profit they generate I would say the executive leadership at Cisco is underpaid. Furthermore, there is nothing wrong with working hard and earning money.

        Go look on Cisco's website now, they're already hiring for individuals who have skills in areas that are being focused on after his announcement. Cisco will continue to sell because their products are the best and most reliable. Today they employee around 70k employees and a 100k contractors, if the keep making moves like they did during this layoff, that number will only grow.
        rlearned