A recent spate of layoffs at Dell and Cisco has been driven by their diminishing hold on core sectors, thanks to newcomers such as Arista Networks challenging Cisco in the networking realm and low-cost PC makers like Acer pressuring Dell, explained an analyst on Friday.
Scott Bickley, who heads the advisory practice at Info-Tech Research Group, commented in light of significant layoff news from both companies. On Friday, Reuters reported that insider sources indicated Cisco might announce further job reductions by Wednesday, coinciding with its fourth-quarter earnings disclosure.
Reuters noted that the upcoming layoffs at Cisco could affect numbers on par with or surpassing the 4,000 positions eliminated in February.
The same report highlighted that Cisco has struggled with decreased demand and issues in the supply chain within its principal operations, leading the company to pursue diversification strategies such as acquiring the cybersecurity firm Splunk for $28 billion.
Meanwhile, on Tuesday, a Bloomberg report indicated that Dell is reportedly laying off thousands of staffers from its sales team, “part of the hardware vendor’s reorganization efforts targeted at increasing its revenues from AI-related sales by putting in a new sales unit focused on AI products.”
Info-Tech’s Bickley stated in an email that “combined with tepid customer demand, [both organizations] need to streamline operations to maintain profit margins. They are hiding behind the illusion of investing in AI and cybersecurity, which is partially true but likely not the primary reason for the cuts. Cisco is a second-rate player in the cybersecurity space at best, and they already have an AI plan in place to support hyperscaler infrastructure, so why the cuts now?”
Cisco’s last earnings report in April, he said, “showed a major decline in revenues and net income, which is a disturbing trend for them of late. I view these cuts as an ill-fated attempt to cut their way to profitability. Cisco also reports earnings on August 14. They may be trying to get ahead of another poor-performing quarter and throwing all the bad news into the ‘kitchen sink.’”
Bickley added, “The recent Splunk acquisition likely plays a part in the RIF [reduction in force] as they seek to integrate this company. There is likely an overlap in management talent and sales teams which would need to be rationalized. There will also be a material expense in integrating Splunk into the Cisco core products, which needs to be funded.”
