Cisco Layoffs 2017: IT Firm Made 760 Job Cuts, All in California

Cisco Layoffs 2017
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Cisco Layoffs in 2017

Layoffs at Cisco Systems, Inc. (NASDAQ:CSCO) have been continuing at a steady pace, as part of the wider trend of IT layoffs in 2017. The major information technology networking company has been in the middle of a major churn.

Reorganization decisions and leadership changes at the top levels of the California-based company could be some of the reasons for the job cuts this year. Declining sales and a shift from the networking switch business to cloud computing, data centers, and cybersecurity have also created certain redundancies. With reorganization and acquisitions, some jobs are always reshuffled.

In August 2016, Cisco declared a plan for 5,500 layoffs, which would cost the company an additional $700.0 million. Cisco extended this layoff plan to include 1,100 more in May 2017 following a poor Q3 earnings report.

As required by the Worker Adjustment and Retraining Notification Act (WARN Act), a Cisco WARN notice was submitted to announce those 1,100 job cuts. More than 200 of those job cuts were at the San Jose headquarters. In September, the company announced that 310 layoffs would be taking effect in mid-October. The entire restructuring plan is scheduled to be completed by 2018.

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Major IT players have had to trim their workforces and reduce expenses in order to become more competitive and future-proof in their business lines. As technology advances, the way people use cloud computing has majorly disrupted the networking and switching business. Companies such as Cisco need to change gears and optimize their workforces to cut costs.

Cisco Announced 60 Job Cuts at Metacloud and Piston Cloud Computing in November 

Cisco announced layoffs as recently as November from two cloud computing companies that it acquired in 2014 and 2015. These Cisco Systems job cuts affect 60 employees that were from the two acquired companies, Piston Cloud Computing, Inc. and Metacloud, Inc.

Since 2015, Cisco has been announcing waves of job cuts, the most notable being the 5,500 employees that were handed pink slips in August last year. Most of these layoffs were at the acquired companies. The new CEO, Chuck Robbins, has been taking over companies at a good rate, and these kinds of strategic reorganizations and post-merger job cuts are now a regular affair in Silicon Valley and in the IT industry in general.

Cisco Layoffs in October: Shift from Hardware to Cloud Services Led to 310 Job Cuts

They say that when big trees fall, the ground shakes. Smaller trees also get affected. When John Chambers announced his decision to step down as Cisco chairman, more announcements about layoffs in California were expected.

In line with this, in September 2017, Cisco announced that there would be about 310 layoffs in October, citing the company’s shift of focus from hardware to cloud services. The job cuts were announced barely a week after Chambers’s resignation announcement.

With cloud services and cloud computing becoming a key focus of the way people store their data and use high-end computing machines for their own businesses, Cisco had no option but to follow the trend.

The company announced in a statement to Bloomberg, “Cisco regularly evaluates its business and will always make the changes necessary to effectively manage our portfolio and drive the most value for our customers and shareholders. As a result, this can mean realigning some areas so that we can invest in others such as security, data center/cloud, and networking.”

But it is not just Cisco that is facing challenges. Many of its rivals are also facing reduced earnings, so they have taken measures to lay off employees, reduce expenditures, and focus on the business that aligns with market demand.

Declining Cisco Quarterly Revenue in May Led to Layoffs 

Here’s a quick look at Cisco’s poor third-quarter earnings and outlook, which were released on May 17, 2017.

Q3 Revenue:

  • $11.9 billion, which was a decrease of one percent year-over-year.
  • Recurring revenue was 31% of total revenue, up two points year-over-year.

Q3 Earnings per Share:

  • Generally accepted accounting principles (GAAP) earnings were $0.50.
  • Non-GAAP earnings were $0.60.

Q4 FY2017 Outlook:

  • Six to four percent decline in revenue year-over-year.
  • GAAP earnings of $0.46 to $0.51.
  • Non-GAAP earnings of $0.60 to $0.62.

The 1,100 layoffs announced following the poor earnings report only added to the total number of Cisco layoffs in 2017. With the less-than-stellar results, it’s no wonder the company has been reorganizing its workforce in order to be agile enough to meet future challenges.

Sources

Cisco earnings: Amid changes, a chance to tell a cloud story,” MarketWatch, November 15, 2017.

Cisco Cutting About 310 Headquarters Jobs Under Strategy Shift,” Bloomberg, September 26, 2017.

Cisco Cuts More Jobs—This Time in the Cloud,” The Information, November 10, 2017.

Cisco cuts 250 jobs in San Jose, has 850 more pink slips to hand out,” The Register, May 31, 2017.

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