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August 14, 2014

Everything you need to know about Cisco’s Q4 financial results

Job custs and customers apply pressure for SDN push.

By Amy-Jo Crowley

1. Cisco slashes 6,000 jobs

Cisco said it will cut as many as 6,000 jobs, which is 8% of its global workforce, over the next 12 months, and takes the total cuts to 18,000 in the last three years. Although CEO John Chambers gave no timeline for the job cuts, he said almost all of the savings would be redirected in new areas such as Cisco’s datacentre, cloud and security businesses.

"If we don’t have the courage to change, if we don’t lead the change, we will be left behind," he said.

2. Customers urge firm to step up on software defined networking.

The layoffs come as Cisco faces new pressure from customers to push deeper into cheaper, software-based networking products rather than hardware. Companies, such as Goldman Sachs and Coca-Cola, told Chambers they didn’t plan to continue paying for new equipment when software could make machines more adaptable and increase performance, according to Bloomberg.

Chambers said that orders for its software-defined networking switch tripled from the previous quarter, and that 60 companies were already paying for its SDN software. Its customer base for the new Nexus 9000 switch line grew from 180 to 580 customers, which is at the heart of Cisco’s SDN strategy.

3. Earnings beat analysts’ expectations

Cisco said net income for the fourth quarter ending in July hit $2.25bn, down from $2.27bn in the same quarter last year, as sales dipped .05% to $12.36bn. For its full fiscal year, Cisco’s revenue came in at $47.1bn, down 3% from 2013, with net income remaining flat at $10.9bn.

The results from the quarter were slightly higher than the $12.14bn in revenue, and per-share earnings of 53 cents, projected by a survey of analysts by Thomson Reuters.

However, Cisco said sales in most emerging markets, including China, Russia, Ukraine and many countries in the Middle East, lost momentum in the quarter, a trend that Chambers blamed partly on economic and political upheavals.

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He added that growth in those regions was unlikely to return for several quarters.

Cisco’s core switching and routing businesses were down 4% and 7% respectively this quarter, while sales to communications service providers fell 11%. But Cisco’s business with enterprise customers in the US and Europe beat expectations, with sales in the UK and Germany rising by more than 10%.

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