Cisco Systems is reportedly the latest tech firm to lay off its employees in the industry with 4000 or roughly 5% of its global workforce set to be cut as the company releases its second quarter earnings for the year.
The internet networking company reported a less than modest earnings result as its earnings per share is down by 3% and its revenue decreased by 6% in the second quarter of its fiscal year. The company's shares also fell more than 5% in extended trading. The layoffs however, are reportedly a part of the company-wide restructuring that aims to focus on "key priority areas" such as artificial intelligence.
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A security flaw on Cisco software is discovered to be capable of making root access through a malware. Because of this, users need to patch the software immediately.
As for the projected date of the layoffs, CNN reports that it would begin this year and would continue into the next year but the company reportedly maintained that the affected employees will receive severance and other termination benefits, costing the company nearly $800 million.
As for Cisco's future, Reuters report that analysts expect Cisco will remain under pressure amidst clients' restricted spending and prioritized clearing of excess networking gear inventory, meaning pressure should be resolved by the second half of 2024 or early 2025, as per Third Bridge Analyst, Joe Brunetto.
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Cisco's Priorities
As AI becomes a prime focus of the Cisco Systems along with its collaboration with Nvidia. CEO Robbins reportedly stated that Nvidia consented to employ its own technology, which is extensively utilized in data centers and AI applications, with Cisco's Ethernet.
The corporation has shifted its attention to the growing AI market in order to combat declining revenue. The business declared last year that it will pay $28 billion to acquire cybersecurity and machine learning startup Splunk.
Cisco reportedly claimed to be well-positioned to dominate in security and observability in the AI era thanks to the merger of two creative pioneers in a press release announcing the deal in September.
Cisco's layoffs comes during the great tech layoffs, wherein even as businesses invest billions of dollars in artificial intelligence, there has been a wave of layoffs in the tech sector, including Cisco. Amazon, PayPal, Google, and Duolingo.
The Reason Behind Tech Layoffs
As for the reason why the tech industry continues to cut its workforce, sources indicate that when coupled with a wave of layoffs that occurred last year, the layoffs have enabled the corporations to achieve their goal of raising their already high earnings even further, which has also raised their aggregate market valuations.
As CNN noted, over 34,000 IT professionals have been fired off since 2024, based on statistics from Layoffs.fyi. The unemployment rate has remained at 3.7%, just over the 50-year low, suggesting that the US economy is creating jobs at a healthy pace.
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