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Cisco readies axe for 4,000 employees

Worries over future prompt swinging of the scythe

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4,000 heads will roll at Cisco, as the networking giant prepares for another lean year in an IT market still recovering from the aftershocks of the global recession.

The company's chief executive, John Chambers, announced the cuts alongside Cisco's financial results for Q4 2013 on a conference call on Wednesday. Cisco shares fell 9 per cent in after hours trading, following the news.

The cuts are preemptive, as Cisco actually made decent money in Q4 2013, reporting revenues of $12.42bn, up six per cent on the same quarter a year ago and a shade above the $12.41bn that Wall Street had been expecting. Net income for the firm was $2.27bn, up 18.4 per cent on the previous year.

But the company faces a tough environment, and for that reason chief executive Chambers is taking up the scythe. The 4,000 employees represent some 5 percent of Cisco's workforce, already diminished by a canning campaign launched in July 2011 that saw 6,500 employees get pink slips, and 5,000 go over to Asian manufacturing giant Foxconn.

"What we see is slow steady improvement, but not at the pace we want," Chambers said. "This recovery is more mixed and inconsistent than the others I have see".

Economy aside, the company faces problems in foreign markets, with the networking giant reporting a 3 per cent slump in sales in Asia in the quarter and a 6 per cent fall in China, along with a 5 per cent rise in sales at home. Given the rapid pace of IT investment in Asia as export-fueled nations look to stuff their dosh into infrastructure buildouts, its unlikely these figures reflect a poor environment abroad.

Rather, they could speak to the growing strength of low-cost Cisco rival Huawei, and the slow balkanization of tech infrastructure as countries look at foreign IT vendors with suspicion.

Revenue in switching equipment for the quarter rose five percent, while Cisco's traditional strength routers failed to show, with revenues reported as flat.

Cisco expects revenue growth of between 3 and 5 per cent for the next quarter, reflecting the tough environment it expects to do business in. ®

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