Cisco Systems, a leading technology innovator based in Johannesburg, South Africa, has revealed plans to streamline its operations by laying off more than 4,000 employees, constituting 5% of its global workforce of 85,000. This move follows earlier speculations, reported two days prior, that Cisco could announce layoffs as early as next week in preparation for its earnings call on February 14.
The tech company had hinted at plans to shift focus towards high-growth areas, signaling an impending restructuring to streamline operations and enhance efficiency. The decision, announced alongside the company’s second-quarter results ending January 27, 2024, aims to realign business priorities and intensify investments in key strategic areas.
The company reported a 6% decline in total revenue to $12.8 billion, with product revenue down by 9% and service revenue up by 4%. Regionally, Cisco experienced revenue declines across the Americas (down 4%), EMEA (down 7%), and Cisco APJC (down 12%). The restructuring, as outlined in the earnings report, is a response to market challenges and a commitment to adapting to dynamic industry landscapes.
Cisco’s CEO, Charles Robbins, explained the company’s performance challenges during a conference call, citing weak demand for its equipment. Analysts anticipate continued pressure on demand for Cisco’s products as telecom clients prioritise reducing excess inventory of networking gear and curb spending.
In light of the restructuring, Cisco will incur pre-tax charges of approximately $800 million for severance, one-time termination benefits, and related costs. The company expects to recognize the majority of these charges in the third quarter of fiscal 2024, with additional amounts anticipated in the fourth quarter and the first half of fiscal 2025.
The announcement has impacted Cisco’s stock, causing a more than 5% decline in extended trading on Wednesday. Furthermore, the company revised its annual revenue projection to a range of $51.5 billion to $52.5 billion, down from the initial forecast of $53.8 billion to $55 billion.
While Cisco acknowledges the challenges, it remains focused on future growth opportunities. The company is strategically investing in artificial intelligence and has entered into a partnership with Nvidia to leverage Cisco’s Ethernet with Nvidia’s widely used technology in data centers and AI applications.
The global technology industry has witnessed an increasing number of job cuts, with over 32,000 reported in 2024 alone. Cisco’s move aligns with this trend, reflecting a broader response to economic challenges and the need for companies to adapt to changing market dynamics.
As the technology sector undergoes transformations, Cisco’s strategic initiatives, including layoffs and investments in emerging technologies, demonstrate its commitment to navigating the evolving landscape and ensuring long-term sustainability. The company’s focus on innovation and agility positions it to address industry challenges while continuing to deliver value to stakeholders.
