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Cisco results show positive impact of cost cutting

Simon Quicke

Cisco managed to surprise the markets in a pleasant way delivering results that were better than expected indicating that the demand for IT is holding up but the vendor has weighed in with plenty of cost cutting to try and get itself back on track.

Seen as one of the bell weather firms in the industry a lot of eyes, not just those of investors, were on the vendor as it unveiled fourth quarter and fiscal year numbers.

One of the worries on Wall Street had been that revenue for the three months ended 30 July would drop below $11bn but Cisco managed to keep the turnover above that level at $11.2bn with net income reaching $1.2bn, down from $1.9bn in the same period the year before.

John Chambers, chairman and CEO at Cisco, said that the cost cutting it had been carrying out had started to deliver and it was confident it was getting into a better position to grow the business in its next fiscal year.

"We've made significant progress on our comprehensive action plan to position ourselves for our next stage of growth and profitability, while delivering solid financial results in Q4," he said.

Chambers said that it had reorganised sales and engineering organisations in the last quarter as it looked to simplify the business and "evolve its business models" and it was also well into the process of reducing its operating costs by $1bn.

"As we start our next fiscal year, you will see a very focused, agile, lean and aggressive company, that is laser focused on helping our customers use intelligent networks to transform their businesses," he added.

For the fiscal year the vendor produced a 7.9% increased in net sales to $43.2bn but suffered a 16.4% drop in net income to $6.5bn compared to 2010.

Last month, Cisco confirmed it would make large-scale redundancies across the business and in a filing with the SEC, it revealed that it would reduce its global workforce "across all functions" by 6,500, including 2,100 who have elected to take early retirement.


This figure amounts to roughly nine per cent of Cisco's total worldwide employees.

The firm added that, partly as a result of the job cuts, it will take a pre-tax restructuring charge of around $1.3bn over "several quarters" with approximately $750m expected to hit during Q4.


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