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Published 15 August 2013 12:04, Updated 26 November 2013 18:35
Job cuts don’t necessarily mean crisis at Cisco.
Technology provider Cisco Systems is cutting 5 per cent of its workforce, but the signs are that this is a case of routine pruning rather than deeper malaise.
Firstly, the company this week reported that it made $US10 billion ($10.9 billion) in profit for the fiscal year ended June 30, up 24.2 per cent year on year. Revenue was also up 5.5 per cent to $US48.6 billion.
Secondly, the company seems to make a practice of trimming staff every couple of years to prevent bloat. This year’s cull of about 4000 worldwide is smaller than the nearly 13,000 axed in 2011.
Thirdly, Cisco’s business is diversified and includes servers, routers, networking software and security products. In July it agreed to buy IT security company Sourcefire for $US2.7 billion.
Cisco is doing well even in areas that are under pressure, such as the server market. Figures from analyst firm Gartner show server shipments fell 0.7 per cent from the first quarter of 2012 to the same time period in 2013. Gartner is releasing statistics for the second quarter later this month).
Cisco is still a relatively small player in servers but it increased market share to 2.3 per cent in the first quarter of 2013, from 1.7 per cent the year before. Dell was the only other top five vendor to increase shipments and market share in the first quarter.
The decline of the server market, as cloud computing grows in popularity, has been painful for companies such as IBM and HP. BRW reported in June it was a likely factor in IBM’s reported decision to cut jobs, including up to 1500 in Australia.
A Cisco Australia spokeswoman told BRW the job cuts were confirmed in the earnings call on August 14, US time, but it was company policy not to disclose regional or country impact.
BRW understands that Cisco employs about 1,000 people locally, though the 5 per cent cut may not be applied uniformly around the world.
Locally, the company would be strengthened by the fact that it won a contract with Vodafone Hutchison Australia to use Cisco products in the telco’s 4G network - a fact that was mentioned in Cisco’s global earnings announcement.