Today: Cisco Systems announces it will lay off 8 percent of its workforce, the fourth consecutive summer the San Jose networking firm has announced thousands of layoffs.
The Lead: Cisco plans another massive round of layoffs
For at least the fourth consecutive summer, Cisco announced plans to lay off thousands of workers in the coming year, even as the San Jose company sends billions of dollars back to investors and reports record profits.
In a conference call Wednesday marking the end of its fiscal year, Cisco executives revealed that the company plans to cut 6,000 jobs, 8 percent of a workforce that tallied slightly more than 75,000 at the end of its last fiscal year, the fifth-largest employee base among Silicon Valley tech companies.
Cisco has made layoffs a summer tradition, announcing 4,000 cuts last August, 1,300 layoffs in July 2012 and a reduction of 6,500 jobs in July 2011. The San Jose networking giant is a frequent acquirer of smaller companies, and seems to refresh its workforce through the year with those employees before planning cuts at the end of the year.
"We will exit this year pretty much with the same number of people we started the year with," CEO John Chambers said Wednesday. "Some groups will not be affected at all. Others will."
Cisco revealed that its revenues for the fiscal year fell 3 percent to $47.1 billion, and profits declined 21 percent to $7.9 billion, or $1.49 a share. For the recently closed quarter, Cisco reported income of $2.2 billion, or 43 cents a share, on sales of $12.4 billion, with Chambers noting that adjusted quarterly profits set a record for the firm.
"I'm pleased with how we are transforming our company over the past several years and that journey continues," Chambers said in Wednesday's earnings release.
Cisco's earnings also revealed that the company shipped $13.3 billion back to shareholders in the form of stock repurchases and dividends in the recently completed fiscal year, a record for the company, and plans to repurchase another $8.6 billion in shares.
Silicon Valley companies have made a habit of spending record profits on stock repurchases and dividends as employee counts stagnate. In 2013, the 150 largest technology companies in the Bay Area increased stock repurchases 148 percent and returned a record $97.5 billion to investors while the total workforce increased 3.1 percent.
Cisco has run into problems with revenue growth, as upstart networking equipment companies such as Ubiquiti and newly public Arista Networks siphon equipment customers and more large companies move to software-defined networking. The company predicted that revenues would be flat in the current period, with its rosiest forecast calling for a 1 percent climb.
"As the market transitions, your staff has to transition," ZK research's Zeus Kerravalla told Reuters. "I see a lot of what they are doing as a reallocation and I think it is the right thing for the company."
Cisco shares dipped about 1 percent in after-hours action after gaining 0.2 percent to $25.20 in regular trading.
SV150 market report: Pandora, security firms lead tech surge
Silicon Valley tech stocks surged Wednesday, gaining 1.2 percent to help push Wall Street indexes to strong gains.
Pandora Media experienced the strongest percentage gain in the SV150 index, rising 10.3 percent to $28.51 after Stifel Nicolaus established analyst coverage of the streaming-music company with a "Buy" rating and $34 price target. Analyst Scott Devitt wrote: "Pandora has meaningfully disrupted broadcast radio listening and taken commanding share of Internet radio," and noted that the Oakland firm still makes much less per listener than traditional radio stations. Pandora shares have bounced back after a post-earnings dive, with a poorly sourced report of possible buyout interest from large tech firms such as Google, Microsoft and Yahoo boosting shares earlier in the week.
Silicon Valley security-software companies benefited from an analyst note from Piper Jaffray's Andrew Nowinski, who wrote, "Cybersecurity is quickly becoming the top spending priority for enterprises" due to heavily publicized online attacks. His top picks in the sector were all Silicon Valley companies, and all gained strongly Wednesday: Palo Alto Networks rose 4.3 percent to $84.79, FireEye added 3.8 percent to $31.85 and Fortinet gained 3.2 percent to $25.64. Intel increased 2.9 percent to $34.10 while announcing a partnership with a Parkinson's disease foundation, then announced after the bell that it had spent $650 million on LSI's networking chip business; Fremont-based LSI was sold to Avago last year, and parts of its business that do not fit with the Hewlett-Packard spinoff have been auctioned off. Apple gained 1.3 percent to $97.24 as AT&T started discounting iPads, and Facebook added 1.3 percent to $73.77 while announcing it would share tracking info on users with advertisers.
In other earnings-related news, JDS Uniphase experienced the worst day in the SV150 after announcing earnings Tuesday, falling 8.5 percent to $10.90. Sunnyvale's NetApp rose slightly after sharing its earnings information Wednesday afternoon, and San Francisco video advertising company YuMe stayed steady after its earnings release.
Up: Pandora, Yelp, Intel, Electronic Arts, Google, Yahoo, Workday, SunPower, SanDisk, Intuit, Adobe, Apple, Facebook
Down: JDS Uniphase, Zynga, eBay
The SV150 index of Silicon Valley's largest tech companies: Up 18.62, or 1.21 percent, to 1,560.76
The tech-heavy Nasdaq composite index: Up 44.88, or 1.02 percent, to 4,434.13
The blue chip Dow Jones industrial average: Up 91.26, or 0.55 percent, to 16,651.8
And the widely watched Standard & Poor's 500 index: Up 12.97, or 0.67 percent, to 1,946.72