Dive Brief:
- Tech giant Cisco plans to lay off 7% of its global workforce as it seeks to invest in key growth areas such as artificial intelligence while also driving more efficiencies in its business, according to a Wednesday securities filing.
- The restructuring plan is more about “reallocating versus being in pursuit of cost savings,” Cisco CFO Scott Herren said during an earnings call on the same day.
- “It's much more about finding efficiencies across the company so that we can pivot more resources… into the fastest growth areas within the company, which are pivoting more into AI, pivoting more into cloud and pivoting more into cybersecurity,” he said.
Dive Insight:
Cisco, which provides computer networking equipment and software for businesses, currently estimates that it will incur up to $1 billion in costs related to severance and other one-time termination benefits, according to the securities filing. The company expects to recognize about $700 million to $800 million of these charges in the first quarter of fiscal 2025 with the remaining amount to be recognized during the rest of fiscal 2025, the filing said.
The announcement came as Cisco also reported its third straight quarter of declining revenues. The company generated $13.6 billion in total revenues in its fiscal 2024 fourth quarter ending July 27, a 10% decline compared with the year-earlier period, according to results released Wednesday.
Cisco is among hundreds of tech companies that have announced job cuts so far this year, with the total surpassing 130,000 since January, according to a tally by the website layoffs.fyi.
The trend at least partially reflects a push by some tech giants to achieve increased efficiency after excessive hiring amid heightened demand for information technology products and services during the COVID-19 pandemic, analysts say. The massive layoffs have also been attributed to industry disruptions triggered by the rapid rise of AI.
“Companies are accelerating transformation, restructuring, and efficiency improvement efforts without certainty on when — or if — the payback will arrive,” New York-based consulting firm AlixPartners said in a statement Wednesday. “Do not expect this structural transformation to end any time soon. We believe there are more layoffs and increasing disruption on the horizon.”
In a recent survey by AlixPartners, 83% tech executives identified AI as having the most potential to radically disrupt their operating structure, delivery model, and commercial construct, the statement said.
During Cisco’s Wednesday call, CEO Chuck Robbins said the company is “shifting hundreds of millions of dollars into AI, into AI networking for cloud, into AI infrastructure, silicon and cyber.”
“It's a meaningful shift, but we feel like the market is moving so quickly we have to do that,” he said.
