Cisco Systems will cut as many as 6,000 jobs over the next 12 months, saying it needs to shift resources to growing businesses such as cloud, software and security.
The move will be a reorganisation rather than a net reduction, the company said. It needs to cut jobs because the product categories where it sees the strongest growth, such as security, require special skills, so it needs to make room for workers in those areas, it said.
"If we don't have the courage to change, if we don't lead the change, we will be left behind," Chairman and CEO John Chambers said.
Cisco has about 74,000 employees, so the cuts will affect about 8% of its staff. It will take charges of about $700 million for the cost of the reorganisation, up to half of that in the current quarter, Chief Financial Officer Frank Calderoni said.
Cisco announced the move on a conference call to discuss its financial results for the quarter, the fourth of its fiscal year. Its $12.4 billion revenue was flat compared with a year earlier with profit dipping slightly to $2.2 billion from $2.3 billion, although Chambers said he's grown more optimistic over the past few months despite the "tough environment".
During the quarter, Cisco posted sharply higher sales of software products, up 29%, and UCS (Unified Computing System) data centre gear, up 30%. In addition, its customer base for the new Nexus 9000 switch line grew from 180 to 580 customers. The Nexus 9000 is at the heart of Cisco's SDN (software-defined networking) strategy.
However, the company's core businesses declined overall, with routing down 7% and switching down 4%.
Sales fell in most emerging markets, including China, Russia, Ukraine and many countries in the Middle East, a trend that Chambers blamed partly on economic and political upheavals. Cisco doesn't expect the picture to improve in emerging markets for several quarters and thinks things could get worse, he said.
The company's sales to service providers are also ailing, partly because of mergers and acquisitions that are reducing the number of potential customers, Chambers said.