Cisco Systems, the global technology giant headquartered in San Jose, California, has confirmed it will be cutting 7% of its global workforce. This latest round of layoffs, announced on Wednesday, comes on top of a similar reduction of 5% earlier this year, which saw over 4,000 jobs axed. The company attributes these decisions to a shift in focus towards high-growth areas like AI, cloud, and cybersecurity.
The cost of these redundancies is estimated to reach up to £800 million, with £560-£640 million of this expected to be reflected in the first quarter financial results. Despite these cost-cutting measures, Cisco's shares experienced a 5% surge in after-hours trading following the announcement. The boost in share value was likely driven by the company's forecast of better-than-expected first-quarter revenue, exceeding analyst predictions.
Cisco's revenue for the first quarter is projected to fall between £10.9-£11.1 billion, surpassing the average analyst expectation of £10.9 billion. The company, a leading provider of routers and switches, has faced challenges in recent times, including sluggish demand and supply chain constraints.
In an effort to navigate these difficulties and diversify its operations, Cisco acquired cybersecurity firm Splunk for a hefty £22.4 billion in March. This acquisition is expected to bolster its subscription business and lessen its dependence on one-time equipment sales.
Cisco's CFO, Scott Herren, expressed the company's commitment to growth and execution in a statement, highlighting their focus on AI, cloud, and cybersecurity. The company's dedication to these emerging technologies is further evidenced by the launch of a £800 million fund in June, aimed at investing in AI startups like Cohere, Mistral AI, and Scale AI. This fund builds upon Cisco's previous investments, with the company claiming to have made 20 AI-focused acquisitions and investments over the past few years.
Cisco's recent financial performance has been strong, with revenue for the fourth quarter ending July 27 reaching £10.9 billion, surpassing estimates of £10.8 billion. Adjusted profit per share also outperformed expectations, clocking in at 69 pence compared to an anticipated 67 pence.
The job cuts, while a significant move, are seen as a strategic measure by Cisco to adapt to evolving market dynamics and secure its position in the rapidly evolving technology landscape. The company's commitment to emerging technologies and its positive financial outlook suggest a future focused on growth and innovation, despite the necessary restructuring efforts.
