Cisco Cuts 5,500 Workers, Shifts Focus To Software, Services

Networking giant Cisco confirmed during its latest quarterly report that the company will cut approximately 7% of its worldwide workforce in a restructuring move designed to accelerate its transition to a software and subscription business.
10 Top Tech Companies Poised For Massive Layoffs
10 Top Tech Companies Poised For Massive Layoffs
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Cisco Systems announced Wednesday, Aug. 17, that the company would cut 5,500 people from its worldwide work base as it looks toward a future more focused on software and services.

While the 7% reduction in its global workforce is far less than the estimated 20% that CRN reported earlier this week, one analyst cautioned Cisco's layoffs are likely to continue through the year.

"Cisco will need to make more layoffs," Trip Chowdry, an analyst with Global Equities Research, wrote in a research note. He added that Amazon Web Services and Microsoft's Azure will reduce Cisco's addressable market by about 40% and put more pressure on the company to move away from traditional networking hardware such as switches and routers.

Cisco's CEO Chuck Robbins, meanwhile, told analysts during the company's fourth-quarter earnings results released Wednesday that he planned to continue to accelerate the company's shift from being a hardware maker to becoming one that focuses on software and services.

"Today, we announced a restructuring enabling us to optimize our cost base in lower growth areas of our portfolio and further investment in key priority areas, such as security, IoT, collaboration cloud and the next generation data center," Robbins wrote in a statement.

"We expect to reinvest substantially all of the cost savings from these actions back into these businesses and will continue to aggressively invest to focus on our areas of future growth."

For its financial fourth quarter, Cisco posted revenue of $12.6 billion and net income of $2.8 billion, an increase from the $2.3 billion it posted a year ago. Cisco plans to dole out the pink slips during the first quarter of the new fiscal year in 2017, which starts now. The company will announce results for its 2017 financial first quarter in November.

[Read more about IT hiring trends for the rest of 2016.]

Cisco is not the only legacy tech company facing massive pressure to transform itself in an era of cloud computing and the internet of things. Earlier this year, Intel decided to move away from its legacy PC and hardware business to focus more on IoT and the cloud, with the company announcing that it would eliminate 12,000 jobs in order to narrow its focus.

In addition, Microsoft, which has already shifted its focus to cloud and has put more emphasis on its Azure platform, has also been steadily eliminating positions, especially within its phone and mobile division, after being forced to write down large portions of its Nokia acquisition.

For IT and non-IT workers who find themselves working at companies preparing large layoffs, one executive recruiter noted there are warning signs to look for to gauge whether these changes will affect a particular division and a specific group of workers.

For example, the words restructuring, re-focusing, and integration tend to result in layoffs down the line.

"More generally, I would say that anything that shows changed behavior is suggestive that something is happening," Jon Holman, founder of executive search firm the Holman Group, told InformationWeek.

That changed behavior can be as subtle as a canceled meeting, or someone above you in the management chain being fired or transferred to other division or department.