Cisco will cut 5,500 jobs in latest restructuring

The networking giant said it plans to use the job cuts as a way to reinvest in its security, IoT, collaboration, datacenter, and cloud technologies.

Cisco Systems said that it will lay off 5,500 employees, or seven percent of its workforce, as part of a restructuring plan designed to shift focus into higher growth areas. The layoffs were announced along with the company's fourth quarter earnings report, which beat estimates.

The networking giant said it plans to use the job cuts as a way to reinvest in its security, IoT, collaboration, datacenter and cloud technologies. The layoffs will begin this quarter.

While significant, the actual number of jobs on the chopping block is far lower than the figure initially reported, which was in the range of 9,000 to 14,000 employees, or 20 percent of Cisco's workforce. However, the general theme behind the cuts remains the same: Cisco wants to transition into a software-focused organization.

"We believe we will transition more of our revenues to a software and subscription based model and accelerate our shift across our portfolio," said Cisco CEO Chuck Robbins.

As for the numbers, Cisco reported a Q4 net income of $2.8 billion, or 56 cents per share (statement).

Non-GAAP earnings were 63 cents per share on a revenue of $12.6 billion, up 2 percent year-over-year.

Wall Street was looking for earnings of 60 cents per share with $12.57 billion in revenue.

Going by segment, Cisco said Q4 product revenue was up 1 percent, while service revenue was up 5 percent, and switching revenue was up 2 percent. Revenue from Cisco's datacenter products was up 36 percent while its advanced threat and web security products grew in terms of revenue year-over-year more than 80 percent and 50 percent, respectively. Routing revenue declined 6 percent.

For the year, Cisco reported earnings of $2.36 per share on revenue of $48.7 billion, up three percent year over year. Analysts were expecting earnings of at least $2.33 a share on revenue of $49.15 billion.

Looking ahead to Cisco's Q1, Wall Street is looking for non-GAAP earnings of 60 cents per share with $12.5 billion in revenue. Cisco responded with a forecast of 58 cents to 60 cents a share for EPS with expected revenue essentially flat.

In terms of the layoffs, the numbers are actually in line with some of Cisco's previous Q4 earnings reports. In 2014, Cisco cut 6,000 employees as part of an overall workforce reduction.