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Cisco lifts axe again, chops nearly one in five execs

Under fire networking Goliath clarifies changes

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Cisco has given marching orders to nearly one in five of its senior execs included in its massive cost-cutting drive and now plans to hand 1,200 contract workers their pink slips too.

The networking Goliath last night revealed a 3 per cent rise in Q4 sales to $11.2bn but a 37.5 per cent collapse in operating profits to $1.45bn and a 37 per cent fall in net profits to $1.2bn.

For the year, Cisco sales grew revenues 6 per cent to $34.5bn. It also made a profit from operations of $7.6bn, down 17 per cent, and net profits of $6.5bn, again down by the same percentage.

Citing a slowdown in its tech market and internal weaknesses, the firm last month finally confirmed it is firing 4,400 employees in its fiscal Q1 started 31 July, had agreed early retirement with 2,100 and is selling its set-box fab in Mexico, which will impact 5,000 jobs.

But COO Gary Moore confirmed on a conference call with analysts last night that Cisco will be making further cuts: "We will also be reducing our contract workforce by approximately 1,200 people in Q1," he said.

The US giant revealed that as part of the process designed to save $1bn, "we have now reduced our VP and above population by approximately 17 per cent". Moore also clarified other organisational changes.

"We have sharply reduced our boards and councils and appointed clear and accountable leadership to steer those. This includes our engineering organisation, where we went from seven individual engineering leads to two co-leaders that are now accountable and empowered to take decisions on the portfolio holistically."

Cisco will book pre-tax charges of $1.3bn over several quarters under the expense action plan, but Q4 numbers included $772m of pre-tax restructuring costs, including $453m for its voluntary early retirement scheme and $204m for employee severance of around 2,600 staff in the US and Canada, "most of whom will exit in early FY'12".

Headcount totalled 71,825 at the end of Q4.

In other changes, Cisco has consolidated its disparate switching, routing and optical groups into one Core Technology Group; moved four software groups into one OS unit; and combined the voice, social networking and WebEx arms into one comms and collaboration group.

Moore said 90 per cent of Cisco's sales team are now managed by three regional leaders, as opposed to 70 per cent of the force controlled directly by geographic field teams.

Moore claims that Cisco plans to "reinvest in our people" to focus on "employee retention and development" through a "compensation and enhanced professional development programmes" but this will hardly console those seeking gainful employment.

CEO Chambers said this was all part of forming the "new Cisco" which judging by the bottom line declines is something that was well overdue.

In other Q4 highlights, switching revenues fell 4 per cent to $3.4bn after being hit by a slowdown in the US public sector – a sector Cisco expects to remain challenging – and routing fell 2 per cent to $1.7bn.

On the upside, turnover in the new products unit grew 7 per cent to $3.5bn with collaboration up 11 per cent, TelePresence up 24 per cent, data centre/ cloud up 32 per cent and USC up 129 per cent. Video grew 13 per cent. ®

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