Cisco announced plans for reduction of 5% workforce on Wednesday, a decision that will result in the elimination of about 4,250 jobs. Cisco shares were down as much as 9% in extended trading. This is as the company navigates a tough economy that has led to thousands of tech industry layoffs this year. The company, which has 85,000 employees, was planning workforce reduction and restructuring to focus on high-growth areas, people familiar with the matter said earlier this month.
Cisco Systems reduction in global workforce, or more than 4,000 jobs is mostly for annual revenue target adjustments to make it lower. Cisco will incur a charge of $800 million on the workforce reduction before tax consisting of severance and other costs and expects to be recognize majority of the charges in the first half of fiscal 2025.
Cisco workforce reduction
Cisco is the latest tech company to downsize in 2024, as the industry continues to squeeze out costs following the market downturn that hit two years ago. January was the busiest month for layoff in the tech industry since March, as Alphabet, Amazon, Microsoft and SAP all said they were eliminating positions, as did eBay, Unity and Discord. So far this year, 144 tech companies have laid off almost 35,000 workers, according to the website Layoffs.fyi.
Cisco shares
Shares of the networking equipment maker 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, it projected earlier.
Cisco said it was increasing its dividend by a penny to 40 cents per share.
Cisco fiscal result
In addition to workforce reduction, Cisco reported strong fiscal second-quarter results but gave a light forecast. Here’s how it did in comparison with the consensus from LSEG, formerly known as Refinitiv:
Cisco earnings per share: 87 cents, adjusted, vs. 84 cents expected
Cisco revenue: $12.79 billion, vs. $12.71 billion expected
Cisco’s revenue declined 6% year over year during the quarter, which ended on January 27, according to a statement.
Cisco net income: It fell to $2.63 billion, or 65 cents per share, from $2.77 billion, or 67 cents per share, in the year-ago quarter.
Cisco deal with Splunk
The company has yet to close its $28 billion acquisition of monitoring and security software maker Splunk. Cisco now expects to complete the deal late in the first calendar quarter or early in the second quarter, CEO Chuck Robbins said on a conference call with analysts.
Cisco revenue
Revenue from networking products totaled $7.08 billion, slightly below the $7.10 billion consensus among analysts surveyed by StreetAccount. With respect to guidance for the fiscal third quarter, Cisco called for 84 to 86 cents in adjusted earnings per share on $12.1 billion to $12.3 billion. Analysts polled by LSEG were looking for adjusted earnings of 92 cents per share on $13.09 billion in revenue.
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.
“We also continue to see weak demand with our telco and cable service provider customers,” CEO Charles Robbins said in a conference call.
Cisco partners with Nvidia
Meanwhile, Cisco is focusing on AI and partnership with Nvidia to boost growth. CEO Robbins said Nvidia agreed to use Cisco’s ethernet with its own technology that is widely used in data centers and AI applications.
Cisco revenue forecast
Cisco expects third-quarter revenue between $12.1 billion and $12.3 billion, below estimates of $13.1 billion, according to LSEG data.
In the second quarter, Cisco recorded an adjusted profit of 87 cents per share and revenue of $12.79 billion, both above LSEG estimates.
