Cisco sees recovery in equipment demand, cuts 7 per cent jobs globally
Cisco Systems (CSCO.O) has announced that it is witnessing rebounding demand for its networking equipment and announced a 7 per cent cut in its global headcount to focus on high-growth areas such as AI and cybersecurity.
Shares of the company were up 5 per cent in extended trading after it forecast upbeat current-quarter revenue.
“Inventory digestion is complete and we’re now returning to a more normalized demand environment,” CEO Chuck Robbins said on an analyst call.
Cisco has been working to reduce its reliance on its massive networking equipment business, which has struggled due to supply-chain disruptions and a slowdown in post-pandemic demand. In February, it said it would cut 5 per cent of its global workforce or more than 4,000 jobs.
It announced the second round of layoffs on August 14, confirming an earlier Reuters report.
The San Jose, California-based company estimates it will recognize pre-tax charges of up to $1 billion in connection with the restructuring plan, with $700 million to $800 million of these being recognized in the first quarter.
The layoffs allow Cisco to “maintain focus on growth areas such as software, services, AI and cybersecurity, while balancing its financial obligations and reducing the percentage of hardware in its product mix”, according to Michael Ashley Schulman, chief investment officer at Running Point Capital.
It expects first-quarter revenue in the range of $13.65 billion and $13.85 billion, the mid-point of which is higher than analysts’ average expectation of $13.71 billion, according to LSEG data.
To accelerate diversification and capitalize on the AI boom, Cisco agreed to buy cybersecurity firm Splunk last year for about $28 billion, its biggest-ever deal.
It also launched a $1-billion fund in June to invest in AI startups such as Cohere, Mistral AI and Scale AI.
Cisco reported revenue of $13.64 billion for the fourth quarter ended July 27, compared with an estimate of $13.54 billion.
Its adjusted profit per share was 87 cents, compared with the estimate of 85 cents.