Cisco Announces 7% Workforce Reduction Amid Strategic Shift
Cisco Systems revealed on Wednesday that it will lay off 7% of its global workforce as part of a strategic realignment towards high-growth sectors.
The San Jose, California-based tech giant anticipates incurring pre-tax charges of up to $1 billion due to the layoffs, with $700 million to $800 million expected to be recognized in the first quarter of the fiscal year.
This decision follows a previous round of job cuts announced in February, when Cisco disclosed plans to reduce its workforce by 5%, translating to over 4,000 positions, and lowered its annual revenue forecast.
Despite the workforce reductions, Cisco’s stock experienced a 5% increase in after-hours trading, buoyed by a forecast of stronger-than-expected first-quarter revenue. The company anticipates revenue between $13.65 billion and $13.85 billion for the first quarter, slightly below analysts’ average projection of $13.71 billion.
Cisco, a leading manufacturer of routers and switches, has been facing challenges due to sluggish demand and supply chain issues in its traditional business areas. To counteract these pressures, the company has pursued diversification strategies, including its $28 billion acquisition of cybersecurity firm Splunk in March. This move aims to shift focus from one-time equipment sales to recurring subscription revenue.
Chief Financial Officer Scott Herren emphasized Cisco’s commitment to growth in artificial intelligence, cloud computing, and cybersecurity. “Our focus remains on growth and consistent execution as we invest in AI, cloud, and cybersecurity while also maintaining strong capital returns,” Herren stated.
In June, Cisco launched a $1 billion fund to invest in AI startups, including Cohere, Mistral AI, and Scale AI. Over recent years, Cisco has made 20 acquisitions and investments in the AI sector.
For the fourth quarter ending July 27, Cisco reported revenue of $13.64 billion, exceeding estimates of $13.54 billion, and an adjusted profit per share of 87 cents, surpassing the anticipated 85 cents.
