Cisco has announced plans to cut 5,500 employees, equivalent to 7 percent of the company's workforce, as the networking firm looks to slash costs before changing its focus to software over hardware.
The layoffs, which will take effect beginning this summer, show how Cisco is scrambling to adapt to the changes in the technology industry that have reduced the demand for the company's main products.
The job cuts were revealed along with Cisco's financial results for the fourth quarter of its recently ended fiscal year. It marks the most dramatic action yet made by CEO Chuck Robbins, who took over the position last year from John Chambers. The post was held by Chambers for two decades, who today remains as the company's chairman.
According to Cisco, it would be reinvesting the savings accumulated from the laid-off positions into businesses that are expected to flourish. Among the divisions that are tagged as such are security, internet of things, data centers, cloud technologies and collaboration.
The number of positions being cut is actually far lower than what was initially reported, as Cisco was said to be slashing between 9,000 and 14,000 jobs, which would be as much as 20 percent of its workforce. The correct number of positions was later revealed in the company's financial results, but a spokesman refused to answer on whether Cisco was planning additional cuts in the near future.
Nevertheless, the layoffs planned by Cisco are the latest example of the massive changes sweeping through some of the biggest and oldest companies in the technology industry. Innovation is being made at an incredible pace, forcing companies to adapt their businesses and venture into new directions to be able to stay afloat.
For Cisco, its corporate customers have increasingly been relying on remote data centers for their needs, as opposed to continuing with their own Cisco-maintained networks within their premises.
Cisco has long been the market leader in providing switching and routing equipment utilized for transferring data between computers and over the internet into data centers. The company has made moves to diversify its revenue sources, such as the $1.4 billion acquisition of cloud-based internet of things service platform developer Jasper Technologies earlier in the year, but these hardware categories remain its biggest revenue streams. With the increasing preference for remote data centers, sales have lagged for switches and routers.
Revenue for the company's fiscal fourth quarter fell to $12.64 billion from $12.84 billion in the corresponding quarter last year. Profit, meanwhile, increased to $2.81 billion, equivalent to 56 cents per share, compared with $2.32 billion, or 45 cents per share, in the fourth quarter of the previous fiscal year.