Cisco boss struggles to update products

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Peter Burrows San Francisco

CISCO Systems chief executive John Chambers is struggling to revamp the largest networking equipment maker, eliminating 6 000 jobs in a new round of cuts and forecasting little to no sales growth.

Including the latest firings, representing about 8 percent of Cisco’s workforce of 74 000, the company has terminated 25 850 positions since February 2009, according to Bloomberg data.

Revenue fell 3 percent to $47.1 billion (R497bn) in the financial year to July 26, the first decline in five years.

The results underscore the difficulties facing Chambers as he seeks to remake Cisco and leave it in the hands of a successor. With the chief executive nearing retirement after almost two decades, customers are telling Chambers that they will not keep paying for expensive hardware that shuttles data and internet traffic, when software can squeeze out more performance and make the machines more versatile.

Cisco has introduced software-driven products, but that has not yet boosted revenue.

“Even if the transition to a more software-oriented business model is successful, revenues are going to come under pressure,” said Brian Marshall, an analyst at International Strategy & Investment Group. “Unfortunately, headcount reductions are going to be a thing of the future.”

While Cisco has eliminated jobs as it seeks to reinvent itself, it has hired more, with headcount climbing by 8 000 employees since 2009, when its workforce was about 66 000.

The company forecast sales would be flat or rise 1 percent in the quarter to October.

Cisco fell 1 percent by 11.32am in German trading. The shares of the US-based company fell as much as 3.3 percent in extended trading on Wednesday. – Bloomberg


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