San Jose-based tech giant Cisco Systems Inc. is slashing its workforce by 5%, signaling the cuts of more than 4,000 jobs as it hunkers down to weather economic headwinds. The move, disclosed in a Wednesday filing with the Securities and Exchange Commission, coincided with the company's latest earnings report. In a strategic pivot, Cisco is trimming its sails to invest in "key priority areas," reported SFGATE.
This isn't the first time Cisco has thinned its ranks; last year, a similar 5% reduction led to hundreds of Bay Area layoffs, illustrating a trend in the tech sector of belt-tightening in response to market shifts and current economic turbulence. As per Hoodline, the layoffs are a component of a broader strategy shift pivoting towards high-growth areas like cybersecurity, cloud software, and AI.
Despite cutting its workforce, Cisco isn't exactly in dire straits financially. The giant reported netting a hefty $2.6 billion profit over the recent quarter. In a statement, Cisco CEO Chuck Robbins heralded solid operating leverage and capital returns, saying, "We continue to align our investments to future growth opportunities. Our innovation sits at the center of an increasingly connected ecosystem and will play a critical role as our customers adopt AI and secure their organizations," reported Cisco's Newsroom.
As it stands, Cisco's total annualized recurring revenue is up 6% year over year to $24.7 billion, and they've increased their dividend by 3% to $0.40 per share. Yet reflecting the cautious macro environment, the tech firm reports a 6% decrease in total revenue and a 3% dip in GAAP earnings per share from the year prior. In the midst of broader industry layoffs, including at tech rivals such as Amazon and Google, Cisco's job cuts reflect a deepening cost-sensitive atmosphere in Silicon Valley, detailed in reporting by SFGATE.
The layoffs are expected to chalk up around $800 million in severance payments and associated costs as Cisco gears up to take the brunt of these charges in the coming quarters. With cost-cutting now seemingly a rite of passage for even the biggest players in tech, eyes will stay fixed on Cisco to see how these cuts impact its ambitious growth targets and influence its standing in a fiercely competitive market.
