Cisco Anticipates Surge in Equipment Demand, Implements 7% Global Workforce Reduction

Cisco experiences a rebound in equipment demand and initiates a 7% global workforce reduction. The company aims to focus on growth areas like AI and cybersecurity while reducing its hardware reliance. Cisco anticipates pre-tax charges of up to $1 billion linked to the restructuring plan.

Credit: REUTERS

Following this announcement, the company's shares rose by 5% in after-hours trading as it projected a positive revenue outlook for the current quarter.

During an analyst call, CEO Chuck Robbins stated, "Inventory digestion is complete and we're now returning to a more normalised demand environment." Cisco has been actively diversifying its business away from its traditional networking equipment segment, which faced challenges due to supply chain disruptions and a slowdown in post-pandemic demand.

In line with its strategy, Cisco had previously disclosed a plan to cut 5% of its global workforce, equivalent to over 4,000 jobs, back in February. The company confirmed a second round of layoffs on Wednesday, aligning with a previous Reuters report.

Based in San Jose, California, Cisco foresees pre-tax charges of up to $1 billion related to the restructuring initiative, with $700 million to $800 million expected to be incurred in the first quarter. This strategic move enables Cisco to emphasise growth areas such as software, services, AI, and cybersecurity while rebalancing its financial commitments and reducing the hardware component in its product portfolio.

Michael Ashley Schulman, chief investment officer at Running Point Capital, highlighted that the layoffs will help Cisco maintain its focus on strategic growth areas. The company anticipates first-quarter revenue to fall within the range of $13.65 billion to US$13.85 billion, surpassing analysts' average projection of US$13.71 billion, as per LSEG data.

In a bid to accelerate diversification and leverage the AI trend, Cisco acquired cybersecurity firm Splunk for approximately $28 billion last year, marking its largest-ever deal. Additionally, Cisco launched a $1 billion fund in June to invest in AI startups like Cohere, Mistral AI, and Scale AI.

For the fourth quarter ending July 27, Cisco reported revenue of US$13.64 billion, exceeding the estimated $13.54 billion. The adjusted profit per share stood at 87 cents, surpassing the anticipated 85 cents.

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• Cisco experiences a rebound in equipment demand and initiates a 7% global workforce reduction.

• The company aims to focus on growth areas like AI and cybersecurity while reducing its hardware reliance.

• Cisco anticipates pre-tax charges of up to $1 billion linked to the restructuring plan.

Source: REUTERS