Job security at Cisco Systems, Inc. (NASDAQ:CSCO) has become an oxymoron as the company continues to cut workers from its roles nearly every year yet somehow doesn’t decrease its overall workforce. Following yesterday’s earnings report, which beat consensus expectations, the company announced that it would cut around 8% of its workforce in its latest round of serial restructuring. Since 2009, the company has cut roughly 20,000 jobs. Where those cuts will come both geographically and in the corporate structure was not addressed yesterday undoubtedly making for a number of nervous employees today.
Jayson Noland a Baird Equity Research analyst spoke to this uncertainty, “It’s probably frustrating to be an employee there when they are going to have major restructuring efforts like this every year or two.” He then added, “if your skills are stale as an engineer or as a sales and marketing guy, you’re running the risk of being replaced.”
Global economy and growth areas
The global economy‘s unwillingness to wake from its slumber is to blame as much as competition for the job cuts. While Cisco Systems, Inc. (NASDAQ:CSCO) cuts jobs quite often, it is generally the jobs in the United States that are affected. Between 2011 and the end of 2013 Cisco cut almost 12,000 jobs but grew its global workforce from 71,825 to 75,049 before shrinking that to 74,042 where it stands today according to the company.
During the earnings call yesterday, CEO John Chambers told analysts “We’ll do limited restructuring across several areas of our business,” adding that the job cuts are “the most difficult decision we make.” Chambers added that “we are making these tough choices” in order to expand its reach in new areas outside its traditional area of routers, switches, servers, and videoconferencing equipment amongst other products. Those areas to which Cisco has look to expand into include consulting services, software, cybersecurity protections, as well as products for the growing “smart homes” market.
Cisco’s earnings
Analysts polled by Thomson Reuters were calling for earnings of $0.41 per share but Cisco Systems, Inc. (NASDAQ:CSCO) delivered $0.43 for the quarter. While this exceeded expectations, revenue was down year-over-year with the company reporting a $2.24 billion profit on sales of $12.36 billion compared to $2.27 billion on sales of $12.4 in 2013.
“I am pleased with our solid performance,” Chambers said during the conference call. “I think we’re doing very well in a tough market.” While that’s all well and good he announced that the company’s revenues would likely grow no more than 1% in the next quarter.
