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Despite high profits, Cisco to layoff five percent of workforce. That is 4000 workers Mr. President.

By Catholic Online (NEWS CONSORTIUM)
August 15th, 2013
Catholic Online (www.catholic.org)

Cisco is frequently seen as a bellwether for the technology industry. It's disconcerting to know that the network equipment giant has announced plans to cut 4,000 jobs or about five percent of its workforce - in spite of high profits.

LOS ANGELES, CA (Catholic Online) - This news arrives after Cisco reported  a net income of $2.3 billion in its fourth quarter, up from $1.9 billion the year previously. As way of explanation, Cisco's chief executive John Chambers said that "the economic recovery is slower and more inconsistent."

Chambers says the layoffs were due to weaker sales in Japan, China and Europe, which had weighed on revenue growth.

"The environment in terms of our business is improving slightly but nowhere near the pace that we want," he said. "We have to very quickly reallocate the resources."

Cisco is looking to reduce costs while it sees demand for its networking equipment remains uncertain. The company also predicts that its revenues in the current quarter would be at the lower end of analysts' forecasts. Its shares fell more than nine percent in after-hours trading.

It is the latest round of job cuts at Cisco as the company restructures its business, moving away from consumer products.

Its fourth quarter results had been in line with expectations, with revenues up six percent to $12.4 billion. For the current quarter, it is estimating revenues of between $12.2 billion and $12.5 billion, compared with analysts' forecasts of $12.5 billion.

An analyst at UBS, Amitabh Passi says that Chambers has a reputation for cutting aggressively in the face of a worsening economy. Passi was surprised with the size of the cuts, but he did not take them as a sign of significant problems at Cisco, which is based in San Jose, California.

Cisco was one of the first companies to aggressively cut costs at the end of the dot-com boom, a move some say allowed the company to rebound more quickly when the economy improved.
Passi said the news was likely to be interpreted as a bad sign for the entire industry. "The gas will come out of the tank tomorrow," he said. "This is going to permeate across the tech sector."

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