Cisco Systems, Inc. (CSCO) to Incur $700 Million One-Time Charge after 6,000 Job Cuts

Following better than expected Q4 results, the world leader in networking, Cisco Systems, Inc. (NASDAQ:CSCO), announced plans to shed its workforce by 6,000 jobs as part of restructuring efforts being undertaken by CEO, John Chambers. The latest layoff represents 8% of the company’s current workforce having already reduced its workforce by 25,850 since 2009.

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The 6,000 job cuts essentially outline’s the kind of challenges that CEO Chambers has been facing as he seeks to transform the company to become lean and agile, in the ever competitive arena. Introduction of new software-driven products has not attracted the much-needed market share as initially thought, to have a substantial impact on revenue.

Cisco Systems, Inc. (NASDAQ:CSCO)’s revenues continue to come under pressure as the company continues to transform itself into a software oriented enterprise rather than a hardware oriented.

Cisco is set to incur $700 million in one-time charges consisting of both severance and other one-time termination fees of affected employees. The charges will mostly be cash based. The layoffs are also expected to have an impact on the company’s earnings in the first quarter of 2015.

Cisco Systems, Inc. (NASDAQ:CSCO) expects to save approximately $250 million to $350 million in operational costs, mostly involving wages as a result of the 6,000 job cuts. Global demand continues to be on a downward spiral with a slow nature of international business not making the situation any better.

Weak sales, as well as increased competition in emerging markets, continue to be the other headwind for the company. Mr. Chambers remains bearish on the company’s sales improving in emerging markets clearly highlighting the tricky situation that the company is at, especially on the international front.

Cisco Systems, Inc. (NASDAQ:CSCO)’s revenue for the fourth quarter came in at $12.4 billion against analyst estimates of $12.2 billion, with earnings per share of 55 cents a share against estimates of 53 cents.

Cash and cash equivalents improved sequentially to $52.1 billion against $50.5 billion in the third quarter and $50.6 billion posted in the fourth quarter of 2014.

Disclosure: none

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