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Cisco Cuts 4,000 Jobs? No, Not Really

Today Cisco’s (NASDAQ:CSCO) stock is down 7.28% to $24.46 after reports that the company would be cutting 4,000 jobs and a disappointing earnings report. Even though the company is cutting 4,000 jobs, they plan on hiring back 3,000 new employees with different skills.  Why is the market reacting so harshly, expectations are too high.

Lets take a closer at today’s report from the company. First off, revenue grew from last years 46 billion to 48.6 billion this year. Gross profit margins showed a slight decrease from 61.2% to 60.6%. Earnings grew from $1.49 per share last year to $1.86 a share. Cisco saw an increase in revenue from countries in the Americas, Europe, Middle East, and Africa. However it saw a decrease in revenue from countries in the APJC country group (full list available here:http://www.cisco.com/web/partners/downloads/765/partner_programs/certification/country_groupings/apjc_country_grouping.pdf). This includes Australia. One reason for the decrease in revenue from these countries might be because of different rates of economic recovery. Still, investors are not happy with the reports.

In the 4th quarter of 2013, Cisco saw an increase in earnings per share from $0.36 to $0.42 compared to the 4th quarter of 2012. Total revenue amounted to $12,417.

Looking at the overall company’s balance sheet, cash and cash equivalents increased to $50,610 for last years 48,716. Overall, Cisco has a year over year growth of 4%. The largest growth is coming from Europe, the Middle East, and Africa at 6%. There was a growth decline of 3% in the APJC countries. Growth in the Americas was 5%.

To invest or not to invest? In general, Cisco continues to have a strong balance sheet. The company has a trailing PE of about 13.

What would you do?