Unfortunately for most of the 5,500 employees Cisco will be laying off, these lines of business are the slowest-growing segments of Cisco’s overall operation.
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Reuters reports that this will “offset the impact of sluggish spending by telecom carriers and enterprises on its main business of making network switches and routers”.
Technology news site CRN, citing sources, first reported on Tuesday that Cisco planned to lay off about 14,000 employees, or almost 20 percent of its workforce.
“This is a large shift, and it’s going to take time to move everything to where Cisco wants it”, said Timothy Zimmerman, an analyst with technology research firm Gartner.
Cisco Systems plans to lay off about 7 percent of its global workforce in a restructuring that will see it further focus on hot IT areas such as the internet of things, security, collaboration, next-generation data centers, and the cloud.
Chief Executive Chuck Robbins is trying to maintain his company’s dominance in networking gear, the backbone of the internet and corporate communications systems, as customers increasingly seek alternatives to the expensive hardware and proprietary software combinations that made Cisco so successful.
The company has already offered many early retirement package plans to Cisco’s employees, CRN said. Microsoft announced in July that it would cut 2,850 jobs in 12 months and HP said that it would lay off 3000 workers by the end of 2016 fiscal. The company’s last retrenched staff in 2014, when it cut 6,000 jobs.
Cisco’s shares were down 1.2 percent at $30.38 in after-market trading on Wednesday. Revenue fell to US$12.64 billion from US$12.84 billion.
Cisco projected flat revenue in the first quarter and gave an earnings forecast that was shy of analysts’ estimates, saying it expected adjusted earnings of 58 cents to 60 cents per share, versus Wall Street estimates of 60 cents.
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“The company is undergoing a massive change, and Robbins clearly has rolled up his sleeves to get it (job cuts) done quickly”, said Rob Enderle, director of technology consultancy the Enderle Group.
