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Cisco's Chambers: Layoffs are part of our growth strategy

Cisco Systems' planned layoffs are intended to free up resources for the company's faster-growing segments and future acquisitions, CEO John Chambers told CNBC on Thursday.

Shortly after reporting earnings Wednesday, Cisco announced plans to lay off 4,000 employees, or 5 percent of its work force. The company said it will take a charge for the restructuring in the fiscal first quarter.

(Read more: Cisco announces plans to lay off 4,000 employees; stock skids)

In an interview with CNBC's "Squawk Box," Chambers described the move as "realigning resources to look where our growth opportunities would be" and that this move was made "because the market is moving so fast." As a result of this fast-moving market, this "resource reallocation" was not something that could be accomplished over the long-term and had to be executed over one or two quarters.

John Chambers, chairman and chief executive officer of Cisco Systems Inc.
Tony Avelar | Bloomberg | Getty Images
John Chambers, chairman and chief executive officer of Cisco Systems Inc.

Resources will be shifted to "new areas of technology," Chambers said, such as cloud computing, mobility and Internet products. "You've got to move resources into those areas. By definition, then you have to move them out of your traditional business," he said. "We literally are investing for the future. You have to balance that from where the resources are going to come from."

(Related: Cisco defends layoffs, sees weak southern Europe)

He characterized the company's approach to acquisitions as "aggressive."

The details of the layoffs will be explained to employees in a conference call Thursday, he said, telling CNBC the company is not moving jobs abroad and that Cisco is "still an American company."

On earnings, he said that "we were delivering exactly what we told the street we would do." He said he's seeing market "inconsistencies in Asia-Pacific and Japan, as well as weakness in the company's top five emerging markets "for the first time."

On Cisco's conference call, Merrill Lynch analyst Tal Liani questioned Chambers on the layoffs and the company's growth prospects, receiving what some interpreted as a dismissive response.

"You know what product orders have done minus the acquisition and spin-outs because that gives you a feeling for what our growth is going to be and those will bump them up or down. It's just not growing at the speed we want," Chambers said on the call.


Simon Leopold, analyst and managing director at Raymond James, said he was concerned about Cisco's lower revenue guidance, but the layoff announcement was the "bigger surprise."

"What we think they're doing is really trying to control costs. It's not a situation to reduce costs or cut costs, but I think this is going to make investors nervous," Leopold told "Squawk Box." He added that since Cisco is considered a tech bellwether, the company's comments that the macroeconomic recovery is looking "inconsistent" was also disappointing, making him "somewhat" concerned about other tech companies.

(Related: Fed uncertainty hurting stock market tone)

For Cisco specifically, Leopold said he is still a buyer of the stock, reiterating a $30 price target. "Cisco is not an investment that is a growth story. It is very much about the earnings, and our earnings estimates really didn't change," he said. "From an investment perspective we continue to like it and we continue to be a buyers of the stock."

The company's fiscal fourth-quarter earnings and revenue for the company edged past consensus analyst expectations, helped by continued strength in its enterprise business.

Cisco said that it expected revenue to grow by 3 percent to 5 percent in the current quarter, and forecast profit in line with Wall Street.

(Read more: Cisco reports earnings that edged past expectations)

Net income rose to $2.27 billion, or 42 cents per share, from $1.92 billion, or 36 cents per share, in the quarter last year. Excluding items, earnings increased to 52 cents per share from 47 cents per share a year earlier.

Analysts were expecting earnings of 51 cents per share on revenue of $12.41 billion, according to estimates from Thomson Reuters.

Revenue climbed 6.2 percent to $12.42 billion from $11.69 billion. Gross margins for the quarter fell to 59.2 percent from 60.6 percent a year ago.

—By CNBC's Paul Toscano. Follow him on Twitter @ToscanoPaul. Reuters contributed to this report.

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