Silicon Valley Tech Giant Lays off 1,100 More Employees

Man holding cardboard

Cisco Cutting its Job Force…Again!

Silicon Valley tech giant Cisco Systems, Inc. (NASDAQ:CSCO) is laying off another 1,100 employees this year, in an effort to streamline its business.

The latest job cuts are preceded by Cisco’s restructuring efforts that began in August 2016, when the company slashed seven percent of its workforce, which resulted in 5,500 layoffs. Prior to that, in 2014, the company laid off 6,000 of its employees, who accounted for roughly eight percent of the company’s workforce.

The company is continuing to downsize the business in order to make it leaner and more efficient. The latest job cuts will cost the company roughly $150.0 million in pretax charges.

Historically, the company’s management team has more often announced layoffs in August (the start of its fiscal year) than at any other time of the year. The latest job cuts, in May, are somewhat of a deviation.

The company took the hard pill of laying off its employees after posting worse-than-expected current-quarter guidance. Cisco management has guided the current fourth-quarter revenue to fall by between four and six percent.

The networking hardware manufacturer generates most of its revenue from sales of networking switches and routers. This segment has recently been in decline, forcing the company to take some dire actions.

The company faces stiff competition from Juniper Networks, Inc. (NYSE:JNPR), Huawei Technologies Co., Ltd., and Alcatel Lucent SA (ADR) (NYSE:ALU). At the same time, the company also blames the lower guidance on the government.

The company sells its hardware to the public sector, including the federal, state, and local governments. The orders for its hardware are expected to fall following the Donald Trump administration’s proposed spending cuts aimed at countering the growing budget deficit.

In the latest third-quarter earnings call, CEO Chuck Robbins explained that government spending in the U.S. is significantly stalling, which will likely account for a revenue decline in the fourth quarter.

The company is now gradually shifting its focus away from its hardware business toward software and services. This move mirrors the wider industry trend, in which hardware tech companies are seeing consumer interest shift toward software and cloud computing.

The company has moved its focus to new avenues of growth in cybersecurity, cloud computing, and Internet of things; in the hopes of reviving revenue growth.

 

Sources:

Cisco to Lay Off 1,100 More Workers,” The Wall Street Journal, May 17, 2017.\

Cisco revenue forecast disappoints; says to cut 1,100 more jobs”, Reuters, May 17, 2017.

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