Cisco Systems announced Wednesday it will eliminate about 4,000 jobs, saying it needs to pare down middle management to speed up decision-making and execution.
The company didn’t say when or in what regions the cuts would take place, but it expects to incur related costs of about US$550 million. About $250 million to $300 million of those costs will be taken in the first quarter of the company’s 2014 fiscal year, which began July 28.
Cisco disclosed the “rebalancing” plan during a conference call to discuss its financial results for the quarter just ended. The company posted revenue of $12.4 billion, up 6 percent from a year earlier, and a profit of $2.3 billion, up 18 percent.
In explaining the move, Chairman and CEO John Chambers also cited uneven economic growth around the world but emphasized the need to quickly respond to changes in a fast-moving industry. Small teams are the key to making and carrying out decisions, he said.
“We just have too much in the middle of the organization,” Chambers said. “We’re just not moving with the speed that we need in this area.”
The job action will help Cisco focus its resources on its core businesses of data center and cloud infrastructure, security, software, services and video, Chambers said. Some of the employees will be rehired in other divisions, he said.
“This is just good business management,” Chambers said. “I’ve learned in this business, you lead with your mind, not with your heart.”
The middle-management cuts are only the latest shakeup of Cisco’s decision-making apparatus. Only a few years ago, the company formed broad-based “councils” to oversee parts of its business, a move that Chambers later reversed in order to speed up decision-making.
“Even when you push things down from the top, it can take longer than it should in this new environment, which is moving at a much faster pace,” Chambers said.
The move is part of Cisco’s push to become the most important company in IT, using its foundation in networking to dominate entire enterprise and service-provider infrastructures.
“I’m not going to miss a window of opportunity which could get this company into trouble,” Chambers said.
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