Cisco to eliminate 7% of workforce, video business takes Q4 hit

Cisco is to eliminate 5,500 jobs, or 7% of its global workforce, as it seeks to “optimise [its] cost base in lower growth areas” and “further invest in key priority areas” including security, the Internet of Things and cloud.

The company said it expected to reinvest all of the cost savings realised from the restructuring into the higher growth businesses.

Cisco estimated it would recognize pre-tax charges to its financial results in the amount of up to US$700 million (€620 million) in the form of severance payments and other termination benefits. Between US$325 million and US$400 million in charges will be recognised in the first fiscal quarter of 2017, with the remainder recognised during the rest of the fiscal year.

Cisco posted total revenues of US$12.6 billion for its fourth fiscal quarter, up 2%. The service provider video business was the worst performing unit, with a revenue decline of 12% year-on-year to US$444 million, excluding the consumer premises equipment business that Cisco sold in November last year to Technicolor for US$600 million.

The sharp fall in service provider video revenues followed a strong third quarter for the unit, which saw an 18% increase in revenue in the three months to March thanks to a strong showing in China.

For the full year, service provider video turned in a 12% increase in revenue to US$1.92 billion.

“We had another strong quarter, wrapping up a great year. I am particularly pleased with our performance in priority areas including security, data centre switching, collaboration, services as well as our overall performance, with revenues up 2% in Q4 excluding the SP Video CPE business,” said Chuck Robbins, CEO of Cisco, in a statement.

“We continue to execute well in a challenging macro environment. Despite slowing in our Service Provider business and Emerging Markets after three consecutive quarters of growth, the balance of the business was healthy with 5% order growth. This growth and balance demonstrates the strength of our diverse portfolio. Our product deferred revenue from software and subscriptions grew 33% showing the continued momentum of our business model transformation.”