Cisco slashes thousands of staff, 7% of entire workforce, pivots into AI

Reorg of entire biz as tech giant addresses downturn in core networking segment

Networking titan Cisco has confirmed in a filing with the Securities Exchange Commission (SEC) that it is eliminating 7 percent of its global workforce as it embarks upon a restructuring plan.

Switchzilla currently employs almost 85,000 people – meaning around 6,000 employees are about to get bad news.

"Cisco currently estimates that it will recognize pre-tax charges to its GAAP financial results of up to $1 billion consisting of severance and other one-time termination benefits, and other costs," the business said. It expects to recognize $700 million to $800 million of those charges in Q1 2025, with the rest playing out during the fiscal year.

The layoffs accompany a company-wide restructure that includes a shift towards AI and security and a consolidation of the arms of the biz. Current networks boss Jonathan Davidson will move to a role advising the CEO during the borg, as the business combines the networking, security, and collaboration segments.

Signalling the increasing importance of the security business, Jeetu Patel, previously executive Vice President and General Manager of Security and Collaboration, will head up the new expanded group. Cisco agreed to buy cybersecurity firm Splunk last year for $28 billion, its biggest ever deal.

In a LinkedIn post today, Cisco boss Chuck Robbins said that Davidson had "made the decision to step away from his current role leading Cisco Networking and will serve as an advisor to me."

Robbins added: "With this, Cisco is bringing our Networking, Security, and Collaboration teams together into one organization, led by Jeetu Patel in an expanded role as EVP and Chief Product Officer."

Talk of the layoffs and reorg circulated earlier this week, and will represent the second major round of job cuts this year. In February, Cisco cut around 4,000 roles.

The redundancies follow declining revenues and shrinking profits.

Cisco's core networking business - switches and routers - has been on a downward trend as large enterprises have shifted toward the cloud. It has bolstered the software and securities operations via acquisition. Cisco is hoping to diversify and reposition itself for subscription revenue.

On Wednesday, Cisco also released its Q4 2024 results [PDF].

Chief financial officer Richard Herren claimed in the earnings call that the layoff was "not about cost saving."

"It's much more about finding efficiencies across the company so that we can pivot more resources, much like we did last year, into the fastest growth areas within the company. Which are pivoting more into AI, pivoting more into cloud, and pivoting more into cyber security," claimed Herren.

CEO Chuck Robbins added that Cisco was making a "meaningful shift" that places "hundreds of millions of dollars" into AI related products – like networking for cloud, infrastructure, silicon and cyber.

Some of this shifting around of dollars is visible in hindsight. As mentioned, the networking kraken spent $28 billion to acquire analytics firm Splunk in March and in February committed to a collab to develop AI-optimized networking kit with Nvidia.

According to the results filing, total revenue for for FY 2024 was down 6 percent year-on-year to $53.8 billion. Networking revenue was down 15 percent to $29.2 billion, whereas security products were up 32 percent to $5.0 billion, observability up 27 percent to $837 million and collaboration up 2 percent to $4.1 billion. Services were up 5 percent to $14.5 billion. Net income for this period, which ended July 27, was down 18 percent to $10.3 billion.

Despite the revenue drop, Robbins described Cisco as having "tremendous demand across the portfolio" and Herren celebrated the business achieving its highest operating margin in history – a non-GAAP 32.5 percent.

The stock market also seemed to celebrate. Cisco shares were up around 6 percent in after hours trading.

Cisco is one of several large tech players recently conducting layoffs. Intel announced it was eliminating 16,000 people – or 15 percent of its global workforce – to curb capital expenses.

Dell also began cutting its workforce by an undisclosed number in order to shift to a strategy that will unlock "the value of modern IT and AI." ®

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