Cisco has announced a reduction of 5% of its global workforce, totaling over 4,000 jobs, amidst a challenging economic landscape in the tech industry, Reuters reported.
This decision comes as the company revises its annual revenue target downward to a range of $51.5 billion to $52.5 billion, down from the previously forecasted $53.8 billion to $55 billion.
The firm’s CEO, Charles Robbins cited weak demand from telco and cable service provider customers as a contributing factor.
“Analysts anticipate continued pressure on Cisco’s products due to restricted spending by telecom clients focusing on clearing excess networking gear inventory. Joe Brunetto, an analyst at Third Bridge, predicts that the networking hardware inventory backlog will likely dissipate by the second half of 2024 or early 2025,” the reports stated.
In response to these challenges, the firm is concentrating on artificial intelligence and partnering with Nvidia to drive growth.
Mr Robbins highlighted Nvidia’s agreement to utilize Cisco’s ethernet alongside its own technology in data centers and AI applications. Despite these efforts, Cisco expects third-quarter revenue between $12.1 billion and $12.3 billion, falling below estimates of $13.1 billion.
With 85,000 employees, Cisco is planning layoffs and restructuring to prioritize high-growth areas. The company anticipates incurring an $800 million charge on the layoffs before tax, primarily consisting of severance and other costs, with the majority of charges expected to be recognized in the first half of fiscal 2025.
In the second quarter, Cisco recorded an adjusted profit of 87 cents per share and revenue of $12.79 billion, surpassing LSEG estimates.