Cisco Cuts Jobs, Paints Glum First Quarter Outlook

Cisco reported its fourth quarter fiscal 2014 earnings on August 13, with a decline in revenue and a flat outlook looking forward.

For the quarter, Cisco reported revenue of $12.4 billion, which is flat year-over-year. For the full fiscal 2014 year, revenue came in at $47.1 billion for a three percent year-over-year decline. Looking forward, Cisco provided first quarter fiscal 2015 guidance for revenue to range from flat to up one percent.

“Our fiscal year began with the number of external headwinds including the federal government shutdown and the possibility of a U.S. default combined with significant slowdown in emerging markets,” John Chambers, Cisco CEO, said during his company’s earnings call. “Even with this backdrop, fiscal 2014 ended with revenues of $47.1 billion, representing the second strongest year in our history.”

Despite that optimism, Chambers is now restructuring his company’s workforce. Frank Calderoni, Cisco CFO, said that the company ended fiscal 2014 with 74,042 employees, a decrease of approximately 1,000 from a year ago. In fiscal 2015, Cisco will lose many more employees.

“We will be taking a restructuring action in FY15 that will be focused on continuing to invest in growth, innovation and talent while managing cost and driving efficiencies,” Calderoni said. “These actions will impact up to 6,000 employees representing approximately 8 percent of our global workforce. “

Calderoni said that Cisco expects to recognize pre-tax charges to its financial results of up to $700 million as a result of the employee restructuring.

“Some of our markets are slowing down and unfortunately you can’t move sales reps from one country to another with different language characteristics,” Chambers said.

Different areas of Cisco’s business also performed very differently. Chambers noted that his company’s routing business declined by 7 percent during the quarter, and switching declined by 4 percent.

On a more positive note, Chambers is optimistic about how the Application Centric Infrastructure (ACI) effort is rolling out. ACI is Cisco’s attempt at Software Defined Networking (SDN).

“In less than one month of availability, we have over 60 paying customers using the APIC with very positive feedback,” Chambers said.

The cornerstone of the ACI architecture is the Application Policy Infrastructure Controller (APIC), which will act as the new policy engine for enabling ACI across the network. Cisco only formally began shipping APIC on July 31.

Cisco’s UCS server business is also growing well.

“In a market many thought we would exit, we gained share for the 18th consecutive quarter to gain the number one position in revenue share for the x86 blade servers in the U.S. with 41 per market share,” Chambers said. “Our UCS business now has a run rate of over $3 billion and we continue to lead the converged infrastructure market.”

Cisco’s security business is also growing, thanks to the company’s Sourcefire division. Cisco acquired Sourcefire for $2.7 billion in October of 2013.

“We are pleased to see revenue from our Sourcefire acquisition accelerate even faster than before they were acquired, which speaks to the power of our combined security architecture in the marketplace today,” Chambers said. “We have taken security from a lower single-digit growing business to a business that we expect to grow comfortably in double-digits growing forward.”

Sean Michael Kerner is a senior editor at Enterprise Networking Planet and Follow him on Twitter @TechJournalist.

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