Dive Overview:
Technology giant Cisco plans to lay off 7% of its global workforce to invest in key growth areas like artificial intelligence and drive operational efficiencies, according to a securities filing on Wednesday. Cisco CFO Scott Herren said on the company's earnings call that the restructuring plan is focused on “reallocating costs, not chasing cost savings.” “The goal is to drive efficiencies across the company and redirect more resources to further focus on the fastest growing areas of the company, which are AI, cloud and cybersecurity,” Herren said.
Dive Insights:
Cisco, a company that makes computer networking equipment and software for businesses, currently estimates it will incur up to $1 billion in costs related to severance and other layoff benefits, according to a securities filing. The company expects to record about $700 million to $800 million of those charges in the first quarter of fiscal 2025, with the remainder recorded over the remainder of fiscal 2025, the filing said.
Cisco is one of hundreds of technology companies that have announced job cuts so far this year, bringing the total number of cuts since January to more than 130,000, according to a tally kept by the website layoffs.fyi.
Analysts say the trend at least partly reflects efforts by some tech giants to boost efficiency after overhiring due to increased demand for information technology products and services during the COVID-19 pandemic. The large-scale job cuts are also said to be due to industry disruptions caused by the rapid rise of AI.
“Companies are accelerating transformation, restructuring and efficiency efforts without knowing when or if the benefits will truly be realized,” New York-based consulting firm AlixPartners said in a statement on Wednesday. “Don't expect this restructuring to end anytime soon — we can expect more job cuts and widespread disruption ahead.”
A recent AlixPartners survey found that 83% of technology executives recognize AI as having the greatest potential to fundamentally disrupt their company's operating structures, delivery models and commercial structures, the statement said.
During Cisco's Wednesday conference call, CEO Chuck Robbins said the company is “putting hundreds of millions of dollars into AI, AI networking for the cloud, AI infrastructure, silicon and cyber.”
“This is a meaningful change, but we feel it needs to be done because the market is moving so quickly,” he said.
