Cisco confirms restructuring plan, to cut 5,500 jobs

USA: Cisco Systems has confirmed its restructuring plan after declaring its Q4 earnings. The networking major will cut about 5,500 jobs globally, representing nearly 7% of its global workforce. Earlier reports suggested the company plans to cut more than 14,000 jobs globally.

The restructuring decision comes as an aftermath of the company's planned switch from its hardware business to a software and services business model to counter its sluggish revenue from its traditional switching and router business.

The company said a statement:

Today, we announced a restructuring enabling us to optimize our cost base in lower growth areas of our portfolio and further invest in key priority areas such as security, IoT, collaboration, next generation data center and cloud. We expect to reinvest substantially all of the cost savings from these actions back into these businesses and will continue to aggressively invest to focus on our areas of future growth. The restructuring will eliminate up to 5,500 positions, representing approximately 7 percent of our global workforce, and we will take action under this plan beginning in the first quarter of fiscal 2017.

The restructuring will cost Cisco about $700 million in paying severance and other one-time termination benefits. Approximately $325 million to $400 million of these charges will be recognized during the first quarter of fiscal 2017 with the remaining amount to be recognized during the rest of the fiscal year.

CEO Chuck Robbins warned of a 'challenging macro environment' despite reporting a 21% increase in net quarterly profits to $2.81bn in Q4.

Overall product revenue in Q4 was $12.6 billion, up 2%, with product revenue up 1% and service revenue up 5% Collaboration, Wireless and Switching product revenue increased by 6%, 5%, and 2%, respectively. Service Provider Video, NGN Routing and Data Center product revenue decreased by 12%, 6%, and 1%, respectively.

"We're aggressively investing in priority areas to drive growth over the long-term, regardless of the environment. We had strong performance in security; data center switching, collaboration and services as well as continued success in the transition of our business model to software and subscriptions," said Robbins.