Cisco is still transforming itself from a networking gear company to a provider of cloud computing and other IT services. However, there are more rough times ahead as it plans to cut another 1,100 jobs, while forecasting another quarterly loss.
The company revealed the job cuts during its third-quarter financial results, which it released on May 17. These cuts are in addition to the 5,500 positions Cisco
eliminated during a restructuring plan that started in August 2016. (See Cisco Set to Cut 14,000 Jobs – Report.)
In his comments to analysts on Wednesday, CEO Chuck Robbins said that he still believes in the company's plans to move more toward cloud, security, analytics, Internet of Things and software and that the strategy will pay off in the next three to five years as its customers look to strengthen their networks.
"As our customers add billions of new connections in the years ahead, the network will become more critical than ever. They will be looking for intelligent networks that deliver automation, security and analytics to help them derive meaningful business value from these connections," Robbins said. "These will be delivered through a combination of new platforms, as well as software and subscription-based services, which we have been focused on accelerating over the last 18 months."
To highlight this trend, Robbins pointed to the recent Wannacry ransomwear attack and what Cisco has been doing to combat it on the network level. (See WannaCry Continues at a Slowed Pace.)
However, Robbins and CFO Kelly Kramer noted that with some of the wins Cisco has had with cloud, there are macro issues the company faces, including slower spending by the US federal government, as well as switching from selling hardware to selling software and subscriptions.
During the quarter, software and subscriptions increased 57%, but service provider revenue dropped by about 30%. The routing and data center segments also slipped.
For its third financial quarter, Cisco reported revenue of $11.9 billion, a 1% decrease from a year ago. The company posted non-GAAP net income of $3 billion or $0.60 earnings per share. GAAP income totaled $2.5 billion or earnings per share of $0.50.
Wall Street analysts were expecting $0.58 per share and revenue of $11.89 billion, according to Reuters.
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However, it was Cisco's guidance for its fourth financial quarter that sent its stock falling during afterhours trading. The company is calling for a revenue decline of 4% to 6% year-over-year and non-GAAP earnings of $0.60 to $0.62.
In the weeks leading up to Wednesday's financial results, Cisco embarked on a buying spree, acquiring companies that help fill in various gaps in its portfolio. Robbins said that he expects the company will continue to invest.
The biggest deal during the quarter was a $610 million agreement for SD-WAN specialist Viptela, which complements Cisco's existing IWAN and Meraki SD-WAN services. (See Cisco Looks to $610M Viptela Acquisition to Simplify SD-WAN.)
Cisco also plunked down $125 million for MindMeld, an artificial intelligence specialist, as well as an undisclosed amount for some of the analytics assets of Saggezza. (See Cisco Buys Analytics Assets From Saggezza.)
— Scott Ferguson, Editor, Enterprise Cloud News. Follow him on Twitter @sferguson_LR.