Cisco's Chambers: Layoffs Were Needed Because 'Market Is Moving So Fast'

As CEO John Chambers sees it, the latest round of layoffs sweeping Cisco is a necessary evil to accelerate the networking giant's push into areas like mobility and the cloud, and to help it keep pace with today's fast-moving, high-tech market.

"It's because the market is moving so fast," Chambers said Thursday in an interview with CNBC when asked what prompted Cisco's decision this week to cut 4,000 jobs from its ranks. "If you watch what we've done, historically, the mistakes that I've made is when I either move too slow, or move fast without process."

The layoffs, which will affect about 5 percent of Cisco's global workforce, were announced alongside Cisco's fourth-quarter earnings results on Wednesday. Cisco shares plummeted nearly 10 percent to $23.92 in after-hours trading, following the earnings release.

[Related: Partners Are Bullish Even With Cisco Job Cuts ]

In the CNBC interview, Chambers said the layoffs were needed to rebalance Cisco's resources, particularly as it continues to integrate the companies it's acquired over the past year. So far in 2013, Cisco announced or completed seven acquisitions, with the bulk of them being targeted at areas like mobility, the cloud and the Internet of Things, market segments Chambers said Cisco will be bullish on moving forward.

Chambers also stressed that the layoffs, ideally, would have taken place more slowly, over the course of one to two years. But given the high-speed pace of the market, that time frame, he said, just wasn't realistic.

"You've got to move resources into those areas through acquisitions and others [means]. By definition, you've then got to move [resources] out of your traditional business," Chambers said. "If the market was growing at normal rates, and the pace was slower, we would do that through normal attrition and do that over a period of one to two years. But in today's market, you've got to move very, very quickly."

When asked if Cisco would continue its recent acquisition spree, Chambers responded, "yes, absolutely." He also said that many of those acquisitions are already paying off, with the Meraki business it acquired in 2012, for instance, seeing 100 percent year-over-year growth in the fourth quarter.

"When you combine an acquisition with great technology, with channels, and with Cisco's architectural play, magical things happen," Chambers said.

NEXT: Partners Unfazed

The fourth-quarter results Cisco issued Wednesday were generally strong. Highlights included a 9 percent year-over-year growth in Cisco's U.S. enterprise business and 12 percent year-over-year growth in its U.S. commercial business. Overall revenue for the quarter was $12.4 billion, up 6.2 percent compared to the same quarter last year, and net income was $2.3 billion, up 18.4 percent year-over-year.

Cisco's Wireless and Data Center businesses particularly shone, with its Wireless segment growing 32 percent year-over-year, and its Data Center growing an even greater 43 percent year-over-year.

That said, Cisco saw some low points, as well. Growth in Cisco's five top emerging markets, for instance, grew a meager 1 percent year-over-year, while its NGN Routing and Security business segments were flat year-over-year.

Cisco partners told CRN Wednesday that they weren't worried about the layoffs, and that their Cisco businesses have been thriving. It's also not the first time solution providers have seen Cisco through a workforce reshuffle; the company has staged a series of layoffs over the past two years, including slashing 500 jobs just earlier this year, 1,300 jobs in July 2012 and a more drastic 6,500 jobs in July 2011.

When asked if he was surprised to see Cisco shares drop so sharply after market close on Wednesday, Chambers replied, "the real issue is where the stock is two weeks, four weeks and a quarter from now, and I feel good about that, by the way."

At press time, Cisco's shares had edged up a bit from yesterday's after-hours trading, down just over 7 percent at $24.51.

PUBLISHED AUG. 15, 2013