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Cisco Layoffs Affect 4,000 Workers, But Is It a Bigger Indicator?

By Michael Mullins   |   Thursday, 15 Aug 2013 11:04 AM

Layoffs at Cisco Systems Inc. will include 4,000 employees, approximately 5 percent of its work force, after a weaker than expected sales forecast in the last quarter that missed most analysts’ estimates.

The news led to the company's shares falling sharply in extended trading on Wednesday, dropping by some 9.5 percent, or $2.51.

Cisco's revenue growth was impacted by weaker than expected sales in Japan, China, and Europe last quarter, despite overall seeing an increase in demand for its products, The Associated Press reported.

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The news was delivered on a conference call late Wednesday by Cisco CEO John Chambers, who called the global economy "challenging and inconsistent."

Revenue for the current quarter through October will be $12.2 billion to $12.5 billion, the San Jose, Calif.-based company said in a statement. Analysts on average were projecting sales of $12.5 billion for the current period.

The biggest maker of networking equipment, Cisco's performance is widely regarded as a bellwether for the technology industry, the AP notes.

With the cuts announced Wednesday, Cisco will have eliminated 12,300 jobs in the past 24 months, including the elimination of some 500 jobs announced in March.

Despite the recent sales news, which has disappointed analysts, year-over-year the San Jose, Calif.-based company grew 4 percent, with 5 percent growth in the Americas and 6 percent growth in the combined sales of Europe, the Middle East, and Africa. Due to economic challenges in Asia, sales in the region declined by 3 percent, the AP notes.

When not grouped with Africa and the Middle East, European sales for Cisco saw a 9 percent jump in the past 12 months.

Addressing the economic conditions in Europe, Chambers said they "vary significantly" by region, with the north and the U.K. showing "very positive progress," the AP reported.

"We remain cautious, however, given the instability of the southern region," he added.

Cisco was founded in 1984 in San Francisco by two members of Stanford University computer support staff, Leonard Bosack and Sandy Lerner.

The company has in the past three decades grown to become a multinational corporation, employing tens of thousands of workers in five continents, according to Forbes magazine, which considers Cisco's brand to be the 10th most "powerful brand" in the world.

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