Cisco Systems has announced significant layoffs, cutting approximately 5,900 jobs, which accounts for about 7% of its global workforce. This move marks the company's second wave of job reductions this year, as it pivots its focus toward emerging sectors like artificial intelligence (AI) and cybersecurity.
The job cuts come as Cisco seeks to adapt to the fast-moving tech industry, which increasingly prioritizes AI technology along with heightened emphasis on cybersecurity measures. Based in San Jose, California, Cisco had employed roughly 84,900 people as of July 2023, making the current layoffs quite substantial.
Earlier this year, Cisco had already laid off around 4,000 workers, showing it is taking drastic steps to streamline operations. The decision appears to stem from the company's desire to realign its business strategy amid changing market conditions.
The company has recently made moves to invest heavily—$1 billion—to partner with tech startups like Cohere and Mistral, aiming to develop cutting-edge AI products. A notable collaboration was also announced with Nvidia, focusing on creating infrastructure for AI systems.
Cisco's layoffs follow Intel Corp.'s recent announcement to slash about 15,000 jobs as it struggles to stay competitive against industry leaders such as Nvidia and AMD. The contrasting fortunes of these two tech giants highlight the shifting dynamics within the technology sector.
The stock market responded positively to Cisco's layoffs, with stocks rising nearly 6% after the announcement. This uptick suggests investors are cautiously optimistic about the potential outcomes of Cisco's strategic shift.
On the cybersecurity front, Cisco unveiled its Cybersecurity Readiness Index earlier this year, aiming to assist businesses evaluate their defenses against potential cyber threats. Cisco's proactive strategies indicate its recognition of growing concerns about cybersecurity across various industries.
Financially, Cisco reported earnings of $2.16 billion—or 54 cents per share—for its fiscal fourth quarter ending July 27, which reflects a 45% decline from the prior year's figures. Revenue also dipped by 10%, falling to $13.64 billion, highlighting the challenging environment the company is facing.
Despite these declines, analysts had anticipated adjusted earnings to reach 85 cents per share on revenues of $13.54 billion, reflecting some degree of expectation within the market. Such forecasts reveal analysts' mixed feelings about Cisco's ability to bounce back amid current challenges.
Looking forward, Cisco has predicted adjusted quarterly earnings of between 86 to 88 cents per share with expected revenues ranging from $13.65 billion to $13.85 billion. Investor expectations align closely with these projections, particularly as the company manages the aftermath of layoff decisions.
Notably, analyst David Heger remarked on the uptick of product orders, indicating potential recovery signals for Cisco. He observed this demand trend as orders rose by 6%, even factoring out recent acquisitions like cybersecurity company Splunk.
Heger emphasized, "The restructuring will help offset the earnings impact from interest expenses associated with financing the Splunk acquisition and will rationalize combined workforces." This statement underscores how critical the layoffs and strategic direction are for Cisco's long-term sustainability.
Overall, Cisco's aggressive restructuring plan attempts to realign its focus to high-growth areas, thereby preparing for a competitive future. The next moves from Cisco will be closely watched by industry stakeholders as they signal how traditional giants handle modern technological demands.
