Cisco to cut up to 5,500 staff in cloud and security shift

Networking titan says it will lay off up to seven per cent of global workforce - less than some expected - as it looks to 'optimise' low-growth areas of business

Cisco is to axe a maximum of 5,500 staff in an annual clear-out designed to help it line up resources with "priority" areas such as security and cloud.

Cisco confirmed in its Q4 earnings announcement that it is planning to cut up to seven per cent of its global workforce, starting in its current fiscal Q1.

The world's media reported earlier today that up to 14,000 staff, or 20 per cent of Cisco's headcount, were facing the axe in the wake of a report by CRN US. A similar figure was mentioned in January by Global Equities Research analyst Trip Chowdhry.

However, in an announcement this afternoon, Cisco chief executive Chuck Robbins said the restructuring would eliminate "up to" 5,500 roles, down on the 6,000 job cuts announced this time two years ago. A comparable cut of 4,000 was also announced in the equivalent Q4 results statement in 2013.

"Today, we announced a restructuring enabling us to optimise our cost base in lower-growth areas of our portfolio and further invest in key priority areas such as security, IoT, collaboration, next-generation datacentre and cloud," Robbins said, adding that the cost savings will be invested back into these latter businesses.

The restructuring is part of a wider shift Cisco is making in its model from a primarily hardware business to a software and services business, Robbins added.

The 5,500 figure is also well down on the 12,000 job cuts (or 11 per cent of the workforce) announced at fellow hardware titan Intel in April.

Cisco grew revenues two per cent year on year to $12.6bn (£9.6bn) in its Q4 ending 30 July 2016, excluding a recently divested chunk of its service provider video business.

However, parts of its traditional networking hardware business dragged, with next-generation routing sales down six per cent to $1.88bn. Switching, which still generates close to a third of Cisco's business, rose two per cent to $3.79bn.

In contrast, security grew by 16 per cent to $540m, collaboration by six per cent to $1.15bn and wireless by five per cent to $752m.

Robbins, who took the reins from long-standing predecessor John Chambers last July, described Q4 as "another strong quarter, wrapping up a great year".

Net profit for the quarter, excluding the divested business, rose seven per cent to $3.2bn.

"We continue to execute well in a challenging macro environment," Robbins said.

Cisco said its latest restructuring plan will saddle it with $700m in pre-tax charges, including between $325m and $400m in Q1.

For the full year, revenues grew three per cent to $48.7bn, excluding the service provider video divestment. For its full-year 2017, Cisco said it expects sales to grow by between plus and minus one per cent.