Cisco to Cut 5,500 Jobs

Times have looked better for tech giant, Cisco. The company has confirmed that it is set to cut 5,500 jobs (7% of their entire workforce)  to alleviate costs and make room for investments in cloud computing and the Internet of Things. The network is in the middle of a shift from expensive networking hardware to software and cloud services. CEO, Chuck Robbins, who took over the position a year ago, tried to push Cisco to stay competitive through a $1.4 billion acquisition of IoT company, Jasper. Cisco has also tried to build partnerships with Apple. 

“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,” Cisco said in its earnings release announcing the cuts. “We expect to reinvest substantially all of the cost savings from these actions back into these businesses and will continue to aggressively invest to focus on our areas of future growth.”

As bad as this sounds, it’s not as bad as had rumored on Tuesday tech news publication, CRN, which suggested that nearly 14,000 jobs would be cut. The company’s layoffs also come while the company is still in a position of market strength. Cisco’s earnings beat Wall Street estimates for the quarter ending in June, hitting $12.6 billion for the quarter, up 2%  from the same period a year earlier. Looking at Cisco’s workforce over the past few years, despite some pretty heavy layoffs, the company has retained a steady balance of employees, only dipping 2% since 2013. This situation is referred to in corporate jargon as “re-balancing” Cisco is essentially dropping employees from one business segment and hiring new talent in growing industries. Robbins has said that the company plans to reinvest in all of the cost savings from the latest reductions into the business. This may upset those who were hoping that that these cuts would go straight to the bottom line.

Cisco is actually a much more efficient company with its workforce than some of its peers. Cisco’s revenue per employee is roughly $668,000, which is triple that of HP. Although, like their peers, the largest businesses offer little growth, if any at all. The company seems to be focusing on smaller growth opportunities, while maintaining its largest businesses.