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Cisco announces 7% job cuts as it focuses on new “areas of future growth”, beats expectations in fourth quarter earnings

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The breakneck pace at which technology is changing has forced even established, traditional companies to change themselves. Cisco, known for its expertise in networking technology, is doing the same as it announced 7% job cuts in its global workforce. The company said that it plans to use these cost savings to invest in high-priority future growth areas.

And what might be these areas, you ask? IoT, modern datacenters, security, cloud, collaboration- pretty much the same areas on which many modern tech companies have shifted their focus to.

Announcing the restructuring process, Cisco said in a statement,

“Today’s market requires Cisco and our customers to be decisive, move with greater speed and drive more innovation than we’ve seen in our history. We expect to reinvest substantially all of the cost savings from these actions back into these businesses and will continue to aggressively invest to focus on our areas of future growth. “

While 7% job cuts are still less than 20% layoffs which some earlier reports had suggested, but it is still a significant one. It will eliminate nearly 5500 positions globally from Cisco.

What is more interesting is that Cisco has continued to grow significantly in its traditional business. This is evident from its quarterly earnings report which has not shown any decline in financial numbers yet.

The company disclosed its fourth quarter earnings which easily beat the analyst expectations. It recorded a revenue of $12.64 against expectations of $12.57 billion.  The revenue also rose by 2% from the same period last year. The net income also increased by 21% from $2.3 billion last year to $2.8 billion this year.

It witnessed Non-GAAP earning of $3.2 billion or 63 cents per share. This also beat the analyst estimates of 60 cents per share.

According to CEO Chuck Robbins, Cisco is planning to use a major part of revenues to transition to a software and subscription based models from its core competency in hardware and networking devices.

“We believe we will transition more of our revenues to a software and subscription based model and accelerate our shift across our portfolio,”

said Cisco CEO Chuck Robbins.

The move by Cisco to shift its focus to new areas is not very surprising, though. In fact, one could also say it is a timely move as other tech giants have already started working in these areas.

Be it the focus and success of Microsoft on its cloud business or Intel’s focus on IoT devices and data centers, the companies are rapidly adapting to the demands of changing tech landscape.

Talking about Intel and Microsoft, both firms have also made similar and much bigger layoffs in past. Intel announced a massive job cut of 12000 employees in April this year. Microsoft also did away with 18000 positions after Satya Nadella became CEO in 2014. Last year also, Microsoft laid off another 7800 employees though it was mostly from its phone division.

Notably, Cisco also announced and carried out a similar job cut during fourth quarter earnings report in 2014. At that time, the company had reduced 6000 employees from its global workforce. This time, the company will begin the layoff process from the first quarter of 2017.

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