Network equipment maker, Cisco, has announced plans to lay off more than 4,000 workers, representing 5% of its 85,000 global workforce.
The company disclosed this as it released its second quarter results for the period ended January 27, 2024. Cisco said the job cuts have become necessary for the company to realign its business and enable further investment in key priority areas.
The company’s total revenue was down 6%, to $12.8 billion, with product revenue down 9% and service revenue up 4%. The company also recorded a decline in revenue across its operations with Americas down 4%, EMEA down 7%, and APJC down 12%.
Restructuring
Announcing its restructuring plans, which will lead to the exit of some of its workers, Cisco in its earnings report, said:
“On February 14, 2024, Cisco announced a restructuring plan to realign the organization This restructuring plan will impact approximately 5 percent of Cisco’s global workforce. Cisco currently estimates that it will recognize pre-tax charges to its GAAP financial results of approximately $800 million consisting of severance and other one-time termination benefits and other costs.
“These charges are primarily cash-based. Cisco expects to take the majority of these actions in the third quarter of fiscal 2024 and recognize approximately $500 million of these charges. Cisco expects approximately $150 million of these charges to be recognized in the fourth quarter of fiscal 2024, and the remaining amount of these charges primarily through the first half of fiscal 2025.”
Weak demand
Cisco CEO, Charles Robbins said in a conference call after the earnings release that the company’s performance was impacted by weak demand for its equipment.
“We also continue to see weak demand with our telco and cable service provider customers,” he said.
Analysts expect demand for Cisco’s products to remain under pressure, as clients in the telecom industry restrict spending, prioritizing clearing their excess inventory of networking gear.
Shares of the networking equipment company fell more than 5% in extended trading on Wednesday, after Cisco cut the forecast to $51.5 billion to $52.5 billion from $53.8 billion to $55 billion, which it projected earlier.
Tech layoffs
Cisco’s layoffs announcement adds to the growing number of global tech companies that have been announcing job cuts since the beginning of this year.
In a repeat of 2023, big tech companies such as Amazon, Microsoft, and Google, among others have laid off thousands of workers just this year.
According to Layoffs.fyi, which tracks tech industry job cuts, more than 70 tech companies have let go over 32,000 employees so far this year.