Cisco Systems announces mass layoffs

Cisco Systems will lay off 5500 staff next year. Image courtesy of Flickr - Diesmer Ponstein.
Cisco Systems will lay off 5500 staff next year. Image courtesy of Flickr - Diesmer Ponstein.

Communications equipment manufacturer Cisco Systems announced last week a large staff reduction as part of a business pivot.

All up, the company will cut 5,500 jobs, a figure which represents around 7% of Cisco’s global workforce.

Currently there is no word on when these layoffs will be concluded, however according to a company press release; they will begin in the first quarter of 2017.

This is the forth such mid-year announcement of job cuts by Cisco Systems in the past six years.

The announced losses are nonetheless strange given that in the same statement that it announced the layoffs, Cisco also revealed healthy profits.

Indeed revenue remained strong at $12.64bn and the company enjoyed a 21% increase in net quarterly profits to $2.81bn.

“We had another strong quarter, wrapping up a great year. I am particularly pleased with our performance in priority areas including security, data center switching, collaboration, services as well as our overall performance, with revenues up 2% in Q4,” said Chuck Robbins, CEO of Cisco.

Pivot to web services

While the company’s business remains strong, the stated reason for the 5,500 job losses was company restructuring.

Reportedly Cisco plans to move away from the core business of manufacturing communications equipment and instead emphasize web services.

The cost savings from workforce reduction in “lower growth areas” of their portfolio will be redirected into security services, the Internet of Things (IoT), collaboration, next generation data centers and cloud services.

Such areas were identified by Cisco as “key priorities” for future growth that demanded aggressive investment.

“Today’s market requires Cisco and our customers to be decisive, move with greater speed and drive more innovation than we’ve seen in our history,” the company explained in a statement.

Despite being significant, the 5,500 job losses were much smaller than a figure of 14,000 immanent layoffs which had been rumored earlier in the week.

Cisco’s share price fell by around 1% following the announcement, and has so far failed to recoup these losses.