Cisco confirmed significant job cuts are on the cards, with the intention to make up to 5,500 staff redundant, representing seven per cent of its global workforce.

The figure is lower than feared following a report yesterday, but still bears comparison to previous culls made by the company in recent years.

The cuts, which were announced as part of Cisco’s fiscal Q4 figures, will fall on lower growth areas of the business, with savings reinvested in priority segments such as security, IoT, collaboration, next-generation data centers and cloud, a statement said.

CEO Chuck Robbins described the process as “enabling us to optimise our cost base in lower growth areas of our portfolio”.

The company did not specify which were the lower growth areas, although they are the firm’s hardware businesses, switching and routing (two of its three largest units, in terms of revenue).

Q4 financials
Routing revenue fell by 6 per cent in the quarter. And the smaller service provider unit, which accounts for more than 50 per cent of routing revenue, fell by 12 per cent. However, switching achieved a respectable increase of two per cent.

Collaboration, Wireless and Security showed revenue growth of 6 per cent, 5 per cent and 16 per cent, respectively.

Overall, revenue from hardware is sliding downwards, while software shows encouraging growth. Total revenue fell in Q4 by 2 per cent to $12.6 billion.

However, a significant drop in the cost of sales in the hardware business meant Q4 operating income was $3.3 billion, against $2.9 billion in the year ago quarter. Net income rose by 21 per cent to $2.8 billion.

On the call with analysts, Robbins was asked whether he anticipates any further decline in growth rates, or other issues that prompted the redundancy programme. He responded diplomatically: “Primarily we are looking at the areas of growth that we believe will grow faster than others. So it’s more of a relative statement than it is an absolute statement,” he added.

However, outlook for Q1 of fiscal 2017 was not particularly upbeat, with revenue expected to be between minus one per cent to plus one per cent compared to the year ago quarter.