Key Points
- Cisco is set to announce a second round of layoffs this year, possibly cutting more than 4,000 jobs.
- The company is shifting its focus to high-growth areas like cybersecurity and AI amid declining demand in its core networking business.
- Cisco completed a $28 billion acquisition of cybersecurity firm Splunk to bolster its subscription services.
- The company has set a target of $1 billion in AI product orders by 2025 and has launched a $1 billion fund for AI startup investments.
Cisco Systems Inc. is preparing to cut thousands of jobs in its second round of layoffs this year as the U.S. networking giant shifts its focus to higher-growth areas like cybersecurity and artificial intelligence (AI). Sources familiar with the matter suggest that the number of employees affected could be similar or slightly higher than the 4,000 jobs cut in February. The official announcement will coincide with Cisco’s fourth-quarter earnings report on Wednesday.
The San Jose, California-based company, which employed around 84,900 people as of July 2023, has been grappling with declining demand and supply chain constraints in its core business of routers and switches. These devices, which direct internet traffic, have long been Cisco’s mainstay, but as the market evolves, the company is diversifying its offerings to include more advanced technologies.
One of Cisco’s major steps towards diversification was the $28 billion acquisition of cybersecurity firm Splunk, completed in March. This acquisition is expected to reduce Cisco’s reliance on one-time equipment sales by bolstering its subscription-based services, an area with more stable and predictable revenue.
In addition to cybersecurity, Cisco is also investing heavily in AI. The company reiterated its goal in May to generate $1 billion in AI product orders by 2025. To support this ambition, Cisco launched a $1 billion fund to invest in AI startups like Cohere, Mistral AI, and Scale AI in June. The company has made 20 AI-focused acquisitions and investments over the past several years, underscoring its commitment to integrating AI into its product offerings.
These layoffs are part of a broader trend in the tech industry, where companies cut costs to offset substantial investments in AI. Since the beginning of the year, more than 126,000 employees have been laid off across 393 tech companies, according to data from Layoffs. Fyi.
Cisco’s stock has struggled this year, down over 9% as of Thursday’s close, reflecting investor concerns over its ability to transition to new growth areas. The upcoming layoffs highlight the company’s efforts to streamline operations and focus resources on its most promising sectors despite the challenging market conditions.
