SAN FRANCISCO: Cisco Systems on Wednesday announced plans to cut seven percent of its global workforce as it shifts its focus from networking hardware to software and services.
The plan to eliminate 5,500 positions came as earnings reports showed Cisco’s profit for the fiscal year climbed to $10.7 billion, 20 percent more than the previous year.
The rise in profit came with annual revenue rising three percent year-over-year to $48.7 billion.
“I am particularly pleased with our performance in priority areas including security, data center switching, collaboration, services as well as our overall performance,” said Cisco chief executive Chuck Robbins.
“We continue to execute well in a challenging macro environment.”
The corporate restructuring aims to cut expenses in “lower growth areas” and shift the money into Cisco priorities such as security, cloud computing, data centers, and the internet of things, according to Robbins.
Cisco planned to re-invest a substantial amount of the money saved through job cuts. Elimination of positions was to commence this quarter.
Faced with a slowdown in its traditional products such as routers for telecom networks, Cisco has been trying for several years to reorient to fast growing sectors.
The company also seeks to increase revenue from ongoing subscriptions for services or software, as compared to sales of equipment.
Robbins said Cisco also sees promise for revenue in providing security for networks.
Global Equities Research analyst Trip Chowdhry believes that Cisco is “just buying time” with its re-focusing of resources and that more job cuts are on the horizon.
Cisco built its fortune on hardware for private data centers, but businesses are increasingly turning to “super-clouds” such as Amazon Web Services and Microsoft Azure which rent processing muscle as needed, according to the analyst.