Cisco reportedly plans to lay off thousands following lower product orders

Cisco reportedly plans to lay off thousands following lower product orders

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Cisco Systems Inc. is expected to axe thousands of jobs in a restructuring initiative that could be announced as early as next week.

Reuters reported the upcoming layoffs today, citing multiple sources familiar with the plan. The tipsters said that Cisco has not yet determined the exact number of employees who will be laid off. The company previously let go 4,100 employees, or about 5% of its workforce, as part of a workforce reduction launched in November 2022.

Today’s report on the impending layoffs comes a few months after Cisco slashed its revenue guidance. Last November, analysts had expected the company to forecast year-over-year sales growth for the three months ended Jan. 28. Instead, it projected a 6.6% revenue drop and a slight decrease in adjusted earnings per share.

Cisco attributed the weak guidance to a slowdown in product orders over the preceding months. The company detailed that orders dropped 20% year-over-year in its fiscal third quarter, primarily due to lower demand from cloud providers and other large customers. According to Cisco, those customers scaled back purchases because they have not yet deployed the products they had bought earlier in 2023.

Three sources told Reuters that the upcoming layoffs are part of an effort by the company to increase its focus on high-growth markets. The initiative is not entirely unexpected. During Cisco’s most recent earnings call, Chief Executive Officer Chuck Robbins told investors that the company is working to “enhance our capabilities in higher-growth areas.”

Robbins pointed to the networking giant’s ongoing acquisition of Splunk Inc. as one element of its effort to accelerate sales growth. The latter company reported a 15% year-over-year revenue increase in the third calendar quarter of 2023, nearly twice the rate at which Cisco’s top line grew during the same time frame. The acquisition is expected to close in the second half of 2023.

Robbins flagged the market for artificial intelligence infrastructure, particularly Ethernet networking gear, as another growth area. The executive detailed that, as of November, Cisco was close to winning more than $1 billion worth of AI infrastructure orders from cloud providers. He added the company is working on reference solutions that combine its network equipment with partner-developed graphics cards and storage equipment.

That the reported workforce reduction is expected to happen next week suggests Cisco could announce it either before or in conjunction with its second quarter earnings report, which is set to be published on Wednesday. The company last November forecasted adjusted earnings of 82 cents to 84 cents for the quarter on between $12.6 billion and $12.8 billion in revenue. For its 2024 fiscal year, Cisco is forecasting sales of $53.8 billion to $55 billion.

Photo: Cisco

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