Computer networking gear maker Cisco Systems has said that it would cut thousands of jobs in its effort to cut costs to revive growth.
Sales of the company bounced back to growth after the economic recession in 2008, when it had embarked on a cost cutting programme. However, last year growth became sluggish again. Investors blamed Cisco for having too many diverse products.
In the past few months, CEO John Chambers has apparently accepted such criticism. He has announced that he would introduce radical steps to put the company back to growth.
Chambers admitted that his company had lost its accountability and needs more discipline to restore its credibility.
In a 1,490-word e-mail to company employees, he had asked them to be prepared for "tough decisions."
Chambers said Cisco will focus on 5 key areas: routing, switching and services; collaboration; data centre ‘virtualisation’ and ‘cloud’ computing; architectures; and video.
Later Cisco decided to retire its Flip video camera business which it had bought for $590m in an acquisition in 2009.
In November last year, the company lowered sales growth projections. This year in February, it went for weaker margins. The financial forecast for the current quarter was also below analyst expectations.
For the fiscal third quarter, which ended 30 April, Cisco’s net income declined nearly 18% to $1.8bn, or 33 cents per share, compared to last year’s earnings of $2.2bn, or 37 cents per share.
Now, the cuts the company wants to cut annual expenses by 6% or $1bn, which could result in the axing of 5,000 jobs.
Chambers has said that the layoffs would be decided soon.
"Each time we’ve done this in the past, we’ve done it crisply and emerged out of it stronger. … We want to do it surgically instead of with a blunt instrument," he said.
