For the third time in three years, significant layoffs are on the horizon at Cisco Systems Inc. In what it calls a major restructuring effort, the company will eliminate up to 5,500 jobs in an effort to invest in priority areas such as security and Internet of Things.
During Cisco’s fourth fiscal quarter earnings call with financial analysts yesterday, company CEO Chuck Robbins said the cuts let Cisco "optimize our cost base in lower growth areas of our portfolio and further invest in key priority areas such as security, IoT, collaboration, next generation data center and cloud."
Robbins said that the bulk of the money saved by the layoffs will be invested in those kinds of growing business areas. The 5,500 layoffs represent about 7 percent of Cisco’s global workforce, and will be implemented in the first quarter of the company’s 2017 fiscal year, which is already underway.
Less Than Expected
The latest announcements follow a round of 6,000 layoffs at Cisco in 2014 and 4,000 in 2013. The newest round was far less than the 14,000 layoffs that some observers predicted last week.
Rob Enderle, principal analyst at the Enderle Group, told us that part of Cisco’s weakness was due to such problems as government agencies being hacked -- developments that tend to cause domestic and foreign buyers to believe every American technology vendor is compromised, especially big networking vendors like Cisco.
"This industry goes through this every 10 years or so, and the firms that don’t change fall by the wayside --- like what happened to most of the telecom companies that existed before Cisco," Enderle said. "The firms that do change survive. IBM is an example of a company that has successfully survived these cycles for over a century."
Career transitioning firm Challenger, Gray & Christmas reported that tech firms have announced 62,917 job cuts so far in 2016, a 71 percent increase from the first part of 2015. Hewlett-Packard Enterprise, Intel, Dell, and Microsoft have also recently cut jobs.
"Microsoft is a showcase for how a successful pivot is done and it took about this time to get to a point where we could definitively say their shift of focus from what they were to what they are was successful," Enderle added.
The reorganization will more dramatically tie security into Cisco’s core along with a greater focus on policy, orchestration and cloud-based management, Robbins said during Cisco's earnings call. He added that the plan will not diminish Cisco’s focus and investment in its core routing and switching business.
One analyst gave Robbins points for at least trying to keep the bleeding to a minimum.
"I think the layoffs reasonably reflect Robbins’ work to refocus on key areas," Peter Christy, research director at 451 Research, told us. "Cisco is a good company and tries to repurpose people, but in the last year they have been explicit that in some cases you really have to bring new people in to make progress, not just redirect those you have."