Cisco Systems is cutting 7% of its workforce, approximately 5,900 employees, as it shifts focus to rapidly growing areas in technology such as artificial intelligence and cybersecurity. The San Jose, California-based networking equipment maker had 84,900 employees as of July 2023. This new round of layoffs follows a previous announcement in February, where Cisco stated it would cut about 4,000 jobs.
The company has recently made significant moves to bolster its AI capabilities, including a $1 billion investment in tech startups such as Cohere, Mistral, and Scale to develop reliable AI products. Cisco also unveiled a partnership with Nvidia to develop infrastructure for AI systems.
The layoffs come just two weeks after chipmaker Intel Corp. announced its own job cuts as it struggles to keep up with rivals Nvidia and AMD. Despite the job cuts, Cisco’s shares rose about 6% after-hours on Wednesday. In the realm of cybersecurity, Cisco launched a Cybersecurity Readiness Index in March to help businesses measure their resilience against attacks.
Cisco layoffs and tech focus shift
The company’s foray into cybersecurity aligns with its strategic focus on high-growth tech sectors. Financially, Cisco reported that it earned $2.16 billion, or 54 cents per share, in its fiscal fourth quarter, which ended on July 27.
This was down 45% from $3.96 billion, or 97 cents per share, in the same period a year ago. Excluding special items, its adjusted earnings were 87 cents per share, slightly above analyst expectations. Revenue fell 10% to $13.64 billion from $15.2 billion.
For the current quarter, Cisco forecasts adjusted earnings of 86 cents to 88 cents per share on revenue of $13.65 billion to $13.85 billion. Analysts expect 85 cents per share on revenue of $13.74 billion. Edward Jones analyst David Heger noted that Cisco is starting to see demand recover, with product orders up 6%, excluding recent acquisitions.
He added that “the restructuring will help offset the earnings impact from interest expenses associated with financing the Splunk acquisition and will rationalize combined workforces.
