Cisco Announces 5% Workforce Reduction: 4,200 Jobs Affected by Restructuring Plan

Cisco is experiencing a challenging environment for its networking business, yet it reports encouraging developments in AI and security sectors.

After days of speculation, Cisco confirmed a restructuring plan. This move means the networking provider will let go of 5%, approximately 4,200 jobs, from its 84,900 workforce. This action aligns with its strategy to concentrate on high-potential sectors like AI and security.

“We are adjusting our investments and costs to suit the current environment to maximize the long-term benefit to our shareholders,” stated Cisco CFO Scott Herren in the company’s second-quarter earnings call on Wednesday. “The restructuring plan we announced anticipates affecting roughly 5% of our global workforce, incurring estimated pre-tax charges around $800 million.”

This large-scale layoff is the second action of this kind the company has made in the past 18 months. Cisco declared a restructuring in November 2022 that incurred a $600 million fee for severance and associated expenses.

Cisco enjoys expansion in various sectors such as security, wireless, and AI networking. However, the company currently grapples with a range of short-term woes.

“In the present macro environment, we observe an increased degree of caution and close examination of transactions due to the prevailing uncertainty,” stated Cisco’s CEO Chuck Robbins during the earnings call. “Our customers’ concerns are making us more prudent with our projections and hopes. Our estimations indicate that it would take one or two more quarters to completely implement their stock, which is more than what we initially assumed” he added.

“Moreover, as discussed in the previous quarter and as seen from the results of other tech providers, clients since the start of fiscal 2024, have been taking longer than expected to deploy the product loads shipped to them in the recent quarters”, Robbins revealed.

“Finally, we are also consistently experiencing weak demand from our telecom and cable services provider clients. This sector has been under significant strain, and they are adjusting the deployment cycle, which is adversely impacting our business perspective,” Robbins concluded.

AI is flourishing. Robbins illustrated that the complete AI pipeline is currently three times larger than what Cisco disclosed in the previous earnings call, culminating to around $3 billion in orders. He further clarified that none of this is related with the Nvidia collaboration, it’s all completely separate.”

This month, Cisco and Nvidia broadened their alliance to deliver blended software and networking equipment that anticipates to assist clients in setting up infrastructure to uphold AI programs effortlessly. Both companies are expected to significantly benefit from their partnership.

Robbins also pointed out the growth in the vendor’s XDR security platform, particularly.

He said, “Our security products like extended detection and response (XDR) and secure access started scaling quickly after being launched this fall. There are currently over 230 Cisco XDR customers, and in the next six months, expect significant announcements across the portfolio due to our quickened organic innovation and inorganic investments.”

Cisco’s XDR service integrates various Cisco and third-party security products to regulate network access, examine incidents, rectify threats, and automate responses, all from a unified cloud-based interface.

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