Networking giant Cisco confirmed during its latest quarterly report that the company will cut approximately 7% of its worldwide workforce in a restructuring move created to accelerate its transition to a software and subscription business.
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While the 7% reduction in its global workforce is far less than the estimated 20% that CRN reported earlier this week, one analyst cautioned Cisco’s layoffs are likely to continue through the year. The company plans to reinvest the cash saved from the layoffs in development of key areas including Internet of Things, cloud computing technology, and next-gen data centers. No details were immediately given as to how many jobs Cisco plans on shedding in the Bay Area.
The San Jose, California, company is now focusing more on equipment tailored for large data centers and pouring more resources into software and security. “Cisco is a global leading company engaged in significant leading edge research and development in Ontario and we anticipate Cisco will continue to invest significantly in this province”.
For the fourth quarter Cisco posted a 21 percent rise in profits to $2.8bn (£2.1bn) from $2.3bn (£1.7bn) in the same year-ago quarter. Raymond James analyst, Simon Leopold, said in a note that the announcement was in line with a more classic 5% job cut.
“Freeing up dollars to accelerate market alignment is what partners would like to see”, said Kent Macdonald, vice president of converged infrastructure and network services at Long View Systems, a Calgary, Alberta-based solution provider and Cisco Gold partner. It will begin in the current quarter, from a workforce of more than 73,700 at the end of April, Cisco said Wednesday in a statement. Cisco has announced that it will layoff 5.500 employees due to its shift toward software. The purge is the latest fallout from a relentless march of innovation that has forced some of the world’s biggest and oldest technology companies to head in new directions in search of revenue growth.
The two companies hope to generate $1 billion of new revenues by 2018, but last month Ericsson CEO Hans Vestberg stepped down as it attempts to drive through its own restructuring plan.
In the first quarter of 2016, Cisco projected flat revenue and expected adjusted earnings of 58 to 60 cents per share.
Cisco’s stock prices went down 1.4 percent at $30.71 on Wednesday on the Nasdaq.
According to PC Magazine, Cisco Systems, which is one of the largest makers of networking gears, anticipates annual growth in its hardware business to be only 2 to 4 percent over the next five years.
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SAN FRANCISCO – Cisco Systems said it would cut almost 7% of its workforce, posting charges of up to $400m in its first quarter, as the world’s largest networking gear maker shifts focus from its legacy hardware towards higher-margin software.
