The layoffs in Silicon Valley continue. The latest company to join the technology cuts is Cisco, the largest maker of telecommunications network equipment, which announced a restructuring plan that will affect about 5% of its global workforce. Since, according to the latest data released by the company, the number of employees at the computer giant exceeds 80,000, this will result in more than 4,000 layoffs, although the company did not specify this.
Cisco has told the US Securities and Exchange Commission (SEC) that the purpose of the restructuring plan is to “realign the organization and enable major investments in key priority areas.” The Company estimates that it will recognize in its results pre-tax charges of approximately $800 million (approximately €750 million at current exchange rates) for severance pay and other benefits and costs.
“Cisco expects to take most of these actions in the third quarter of fiscal 2024 and record approximately $500 million of these charges. Cisco expects approximately $150 million of these charges to be recognized in the fourth quarter of fiscal 2024, with the remaining amount of these charges to be recognized primarily through the first half of fiscal 2025, the company told supervisors. Cisco's fiscal year runs from August to July, so the third fiscal quarter is the current one, from February to April, and the fourth is from May to July.
The company announced the layoffs on the day it filed its quarterly financial statements, which showed a 6% drop in revenue to $12,791 million and a 5% drop in net profit to $2,634 million. In the cumulative first half of the fiscal year (from August to January), sales are still up 1% to $27,459 million and profits are up 15% to $6,272 million.
Cisco expects revenue of between $12.1 billion and $12.3 billion for the third fiscal quarter ending in April, below analysts' expectations. Excluding certain items, earnings will be 84 cents to 86 cents per share, versus a forecast of 92 cents. For fiscal 2024, the company forecasts revenue of $51.5 billion to $52.5 billion and adjusted earnings per share of $3.68 to $3.74, both below market expectations.
Shares of Cisco, a company valued at just over $200 billion, fell more than 5% in normal trading hours after results and forecasts disappointed investors. Over the past 12 months, the company has gained barely 4% while the prices of big tech companies have skyrocketed.
“We continue to align our investments with future growth opportunities. “Our innovation is at the heart of an increasingly connected ecosystem and will play a critical role as our customers harness AI and secure their businesses,” Chuck Robbins, president and CEO, said in a statement.
Some technology spending is shifting from communications networks to microprocessors and computers amid enthusiasm for generative artificial intelligence. Customers are concerned about the economy, causing them to postpone orders and reconsider the amount of equipment they may need, Robbins told analysts on a conference call. “Customers are delaying orders and paying a little more attention to them,” he said, according to Bloomberg. Orders fell 12% in the second quarter.
Cisco joins tech companies laying off employees. Nearly 35,000 layoffs were announced in the month and a half of 2024, according to Layoffs.fyi, which has been tracking tech sector workforce cuts since the pandemic. The list includes Google, Microsoft, Amazon, Zoom, Meta, Uber, Snap, Just Eat, eBay, SAP, Citrix, PayPal, iRobot and Salesforce. In 2023, this website counted 262,000 layoffs across more than 1,000 tech companies.
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