Cisco today announced a reduction of 7% in its global workforce and a reorganization of its business structure, focusing on networking, security, and collaboration, which will lead to a pre-tax charge of $1 billion. This recent move will affect approximately 6,000 jobs. Earlier in the year, Cisco reduced its workforce by 4,200, resulting in around $800 million in pre-tax charges.
During the fiscal fourth-quarter earnings call, Cisco CEO Chuck Robbins emphasized the company’s push into three key areas: AI-driven networking, security, and collaboration technology. The restructuring aims to allocate more resources to these rapidly growing sectors. “We are actually shifting hundreds of millions of dollars into AI,” he noted, focusing on enhancing core Cisco technologies including networking, cloud, cybersecurity, and silicon technology. Robbins highlighted that this significant shift is essential as the market pace necessitates rapid adaptation.
“It’s much more about finding efficiencies across the company so that we can pivot more resources, much like we did last year, into the fastest growth areas within the company. [We] are pivoting more into AI, pivoting more in the cloud, and pivoting more into cyber security,” stated Cisco CFO Scott Herren during the call. “So think of it more as reallocating versus being in pursuit of cost savings.”
As part of the restructuring, Cisco is merging its networking, security, and collaboration teams into a single group. This unification includes the security technology obtained with Cisco’s acquisition of Splunk; the entire Splunk product line will be integrated into this new organization, according to Robbins. Notably, the Splunk acquisition added $960 million to Cisco’s fourth quarter earnings.
Cisco is consolidating its entire product portfolio under one team, led by Jeetu Patel, Cisco’s executive vice president and chief product officer. Patel previously served as Cisco’s executive vice president and general manager of security and collaboration. Additionally, Jonathan Davidson, executive vice president and general manager of Cisco networking, will transition into an advisory role to Robbins.
Cisco is undertaking in-depth product integrations throughout its portfolio, focusing on a platform strategy to meet customer needs, Robbins explained. “With the rapid advancement of the AI revolution and the evolving demands of our enterprise customers, combined with the increasing convergence of security and networking, it was pertinent to appoint a single leader for these pivotal areas,” commented Robbins.
In a recent discussion about AI, Robbins revealed that Cisco has secured approximately $1 billion in AI technology orders from hyperscaler clients this year and anticipates similar figures for the next year.
“Up to this point, with our Ethernet AI fabric being utilized by three of the top four hyperscalers and backed by Cisco validated designs for AI infrastructure, we foresee an additional $1 billion of AI product orders in fiscal year ’25,” Robbins mentioned. “This growth is driven by various operational use cases among hyperscalers, particularly in AI. Moreover, we have secured multiple design wins, with about two-thirds of these related to AI, which is above the existing opportunities with webscale AI,” he added.
Regarding AI adoption in enterprise settings, Robbins pointed out that it’s currently minimal, but a growing interest is visible. “For the first time this quarter, we’re seeing enterprises actively upgrading their infrastructure to prepare for AI. Some are reallocating their budget for AI towards infrastructure modernization to ready themselves for upcoming AI applications. We believe our position is strong to significantly benefit from the spread of AI applications within the enterprise sector,” Robbins stated.
“We think we’re beginning to see customers actually prepare for AI applications, even though, in many cases they may not know the full range of what they will be deploying, but they know they need to be ready,” Robbins said.
