Cisco Systems Inc.’s share price down, to cut 6 000 employees as it struggles to return to growth

Cisco Systems Inc., the worlds biggest networking-equipment manufacturer, is to take another round of job cuts after reporting a quarter of poor sales growth. The company revealed that it is to eliminate 6 000 jobs, which takes the total lay-offs to 18 000 over the last three years.

The latest job reductions in Cisco Systems Inc. amount to about 8% of the global workforce of the company. This step has been taken at a moment when the network-equipment makers CEO Mr. John Chambers is trying to bring a new life to the company and improve its performance in emerging markets, before he retires after spending almost two decades at the position.

The news of the lay-offs comes at a time when the U.S.-based company has just reported that its revenue in the fiscal year that ended July 26 dropped 3% to $47.1 billion, marking the first decline in five years. The company also projected that revenue for the quarter that ends in October will be between $12.1 and $12.2 billion, based on Ciscos own forecasts for sales to be unchanged or rise 1%.

Cisco Systems Inc. also reported a fourth-quarter revenue of $12.4 billion dollars, beating analysts expectations for sales of $12.2 billion. The companys profit, excluding some items, was 55 cents a share during the period. In comparison, analysts predicted a profit of 53 cents apiece. The orders in the companys home market were reported to have increased by 5%, while Asias orders have slumped 7% during the period. The net income over the fourth fiscal quarter fell to $2.25 billion, or 43 cents a share from $2.27 billion, or 42 cents a share over the same period a year ago.

The Chief Executive Officer Mr. Chambers explained that the job cuts are made in order to free some room for adding different kinds of skills instead of cutting the companys total expenses. According to him, the lay-offs in Ciscos unsuccessful units will provide the company with the opportunity to add needed skills in the divisions that have reported growth.

Mr. John Chambers said in a statement, which was cited by the Wall Street Journal: “We will exit this year pretty much with the same number of people we started the year with. Some groups will not be affected at all. Others will.”

Cisco has been reported to have eliminated 25 850 positions since February 2009. According to the statement made by the company, Cisco Systems intends to add some staff in areas that include its data centre, software, security and cloud offerings. The companys CEO refused to reveal the businesses, which will be affected by the latest job reductions.

Cisco Systems Inc. fell as much as 3.3% in New Yorks extended trading. The stock was 0.2% up to close at $25.20 per share yesterday, marking a one-year change of -4.26%. The market capitalization of the company, as of yesterday, was $129.09 billion. According to the information published on CNN Money, the 36 analysts offering 12-month price forecasts for Cisco Systems Inc. have a median target of $27.00, with a high estimate of $31.00 and a low estimate of $16.00. The median estimate represents a +7.14% increase from the last price of $25.20.