Cisco Systems announced that the firm will reduce its global workforce by 5 per cent, equivalent to over 4,000 employees, and revised its annual revenue target downwards. This decision comes as the company manoeuvres through a challenging economic environment, which has resulted in numerous layoffs across the tech industry this year, according to a report by the news agency Reuters.
In extended trading on Wednesday, shares of the networking equipment maker declined by over 5 per cent, following Cisco’s downward revision of its forecasted revenue range to $ 51.5 billion to $ 52.5 billion. This adjustment comes after the company had initially projected a range of $ 53.8 billion to $ 55 billion.
As per the information available on the company’s website, Cisco wrapped up the previous year with almost 85,000 employees, reported AFP.
During a conference call, CEO Charles Robbins said, “We also continue to see weak demand with our telco and cable service provider customers,” reported Reuters.
Analysts anticipate continued pressure on demand for Cisco’s products as clients within the telecom industry focus on reducing spending and prioritising clearing their excess networking gear inventory.
According to analyst Joe Brunetto from Third Bridge, there is an anticipation that the surplus inventory of networking hardware will be addressed by the second half of 2024 or early 2025, reported Reuters.
In the meantime, Cisco is directing its attention towards artificial intelligence and forging a partnership with Nvidia to stimulate growth. CEO Robbins mentioned that Nvidia has agreed to integrate Cisco’s ethernet alongside its own technology, which is extensively utilised in data centres and AI applications.
Cisco anticipates third-quarter revenue to range between $ 12.1 billion and $ 12.3 billion, falling short of LSEG’s estimates of $ 13.1 billion. Earlier this month, Reuters reported that the company, which employs 85,000 individuals, was planning layoffs and restructuring efforts to concentrate on high-growth areas.
As part of this initiative, Cisco expects to incur a charge of $ 800 million on the layoffs before tax, covering severance and other costs. Most of these charges are anticipated to be recognised in the first half of fiscal 2025. In the second quarter, Cisco reported an adjusted profit of 87 cents per share and revenue of $ 12.79 billion, surpassing LSEG’s estimates.
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