After days of speculation, Cisco today announced a restructuring plan that will see the networking vendor cut 5%, or about 4,200 jobs, from its 84,900 workforce as it plans to continue to focus on high-strength areas such as AI and security.
“We are realigning our investments and expenses to reflect the current environment to help maximize long-term value for our shareholders,” said Cisco CFO Scott Herren during the company’s second-quarter earnings call on Wednesday. “As part of our announced restructuring plan, we expect to impact approximately 5% of our global workforce with estimated pre-tax charges of approximately $800 million.”
It’s the second large layoff the company has initiated in the last 18 months. Cisco announced a restructuring in November 2022 that involved a $600 million charge for severance and related expenses.
While Cisco is seeing growth in a number of areas – including security, wireless, and AI networking – there are a number of near-term challenges for the vendor.
“First, in terms of the macro environment, we are seeing a greater degree of caution and scrutiny of deals given the high level of uncertainty,” Cisco CEO Chuck Robbins said during the earnings call. “As we’re hearing this from our customers, it’s leading us to be more cautious with our forecast and expectations. We still believe we are one to two quarters away from full implementation of their inventory, which as I mentioned is longer than we expected.”
“Second, as we discussed last quarter and subsequently saw in other technology provider results, customers have been taking time since the start of our fiscal 2024 to deploy the elevated levels of products shipped to them in recent quarters, and this is taking longer than our initial expectations,” Robbins said.
