NEW YORK – Cisco Systems (NASDAQ:CSCO) announced that it would open a round of restructuring that would axe about 5 percent of its workforce (roughly 4,000 jobs). The network equipment maker is making a fresh attempt to reduce costs and refocus on growth due to declining demand. Speaking about the restructuring, CEO John Chambers said ‘the environment in terms of our business is improving slightly but nowhere near the pace that we want.’
Prior to the announcement, which will cut redundant staff and move others to growth areas such as datacenters, cloud computing, mobile, and software markets; shares in Cisco have risen more than 50 percent in the past twelve months as investors had assumed that the company would be able to ride out slowing demand to technology infrastructure.
In the past investors have watched Chambers’ quarterly conference calls with considerable interest as Cisco’s performance is generally regarded at a strong indication of the outlook for the technology industry. Shares of Microsoft (NASDAQ:MSFT), Oracle Corp (NASDAQ:ORCL), IBM (NYSE:IBM) and Hewlett-Packard Company (NYSE:HPQ) were all down slightly after hours.
This is not the first time that Cisco has reduced its workforce. Two years ago, the company announced a plan to reduce expenses by $ 1 billion including a 15 percent workforce reduction. However, many analysts are wondering whether the recently announced cuts will be enough as Cisco has been losing market share in the enterprise market space for more than 2 years while Hewlett-Packard has more than doubled its share. Other areas where Cisco is losing share include WAN Optimization, Analog-to-Digital Conversion (ADC), and Ethernet Switches.
Concerns about security have forced some Governments to reconsider purchasing Cisco’s equipment. In June, the Chinese media accused Cisco of being a security risk and urged a shift to domestic suppliers following revelations of the National Security Agency’s surveillance program.
The uncertainties have affected the company’s profitability and company executives forecasted that earnings per share would come in below analyst’s estimates of $ .51 cents. The company also forecasted that revenue would come in below estimates of $ 12.5 billion. Shares of Cisco fell 7 percent in extremely heavy trading on Thursday (over 130,000,000 shares compared to the daily average of roughly 30,000,000).
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