Cisco Systems has announced it will cut approximately 6,000 jobs, marking its second significant workforce reduction this year, as it pivots towards high-growth areas like artificial intelligence and cybersecurity.
Cisco Announces Significant Workforce Reduction Amid Shifts Toward AI and Cybersecurity
San Jose, CA – Cisco Systems, a leading manufacturer of computer networking equipment, has announced significant layoffs, marking its second major workforce reduction this year. The company revealed on Wednesday that it would cut approximately 7% of its global workforce, equating to around 6,000 jobs, based on its reported employment of 84,900 employees as of July 2023.
These layoffs follow an earlier round in February that saw over 4,000 employees, or approximately 5% of the workforce, let go. Despite these cuts, Cisco has managed to exceed Wall Street expectations, with its stock rising nearly 6% in after-hours trading following the announcement.
In its most recent earnings report, Cisco posted a net income of $2.16 billion for the quarter ending July 27, down 45% from the previous year. Revenue also decreased by 10% to $13.64 billion. However, these figures surpassed analyst estimates, which had pegged revenue at $13.54 billion and adjusted profit per share at 85 cents, compared to Cisco’s actual 87 cents.
The layoffs are part of Cisco’s strategic pivot toward high-growth areas such as artificial intelligence and cybersecurity. As part of this transition, the San Jose-based company has outlined a plan that includes pre-tax charges of up to $1 billion, with between $700 million and $800 million to be recognized in the first quarter alone.
Cisco’s Chief Financial Officer, Scott Herren, emphasised the company’s commitment to growth and consistent execution, particularly in the realms of AI, cloud computing, and cybersecurity. “As we look to build on our performance, we remain laser-focused on growth and consistent execution as we invest to win in AI, cloud, and cybersecurity, while maintaining capital returns,” Herren stated.
The tech giant has been grappling with diminished demand and supply-chain challenges in its core business of routers and switches, which direct internet traffic. To mitigate this, Cisco has diversified its portfolio with strategic acquisitions, including a notable $28 billion buyout of cybersecurity firm Splunk in March. This acquisition aims to bolster Cisco’s subscription-based business, reducing dependency on one-time equipment sales.
In addition to its acquisition strategy, Cisco launched a $1-billion fund in June to invest in AI startups like Cohere, Mistral AI, and Scale AI. Cisco has made 20 AI-focused acquisitions and investments over the past few years, signalling its commitment to integrating advanced technologies into its product and service offerings.
Looking ahead, Cisco has projected its first-quarter revenue to be in the range of $13.65 billion to $13.85 billion, surpassing the analyst average of $13.71 billion according to LSEG data.
As Cisco navigates these transitions, the company strives to maintain a balance between innovation and operational efficiency, aiming to position itself as a frontrunner in emerging technological landscapes while sustaining shareholder value.
