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Cisco's Strategic Shift: Thousands of Jobs Cut as Focus Turns to AI and Cybersecurity

Cisco Systems, a leading technology company, has announced a significant workforce reduction, laying off 7% of its employees. This move is part of a strategic shift towards rapidly growing sectors such as artificial intelligence (AI) and cybersecurity.

Cisco | BetterWorld Technology

Key Takeaways

  • Cisco is laying off 7% of its workforce, approximately 5,900 employees.

  • The company is shifting its focus to AI and cybersecurity.

  • This is the second round of layoffs for Cisco this year.

  • Cisco plans to invest $1 billion in tech startups to develop AI products.

  • The company has partnered with Nvidia to develop AI infrastructure.

Workforce Reduction

Cisco Systems, based in San Jose, California, is planning to lay off 7% of its employees, marking its second round of job cuts this year. The company had 84,900 employees as of July 2023, and the layoffs will affect approximately 5,900 workers. In February, Cisco announced a similar reduction, cutting about 4,000 jobs.

Strategic Investments

In June, Cisco revealed plans to invest $1 billion in tech startups like Cohere, Mistral, and Scale to develop reliable AI products. The company has also announced a partnership with Nvidia to create infrastructure for AI systems. These moves are part of Cisco's broader strategy to diversify its business and focus on high-growth areas.

Financial Performance

Cisco's layoffs come shortly after Intel Corp. announced a significant workforce reduction. Despite the layoffs, Cisco's shares rose by about 6% in after-hours trading. The company reported earnings of $2.16 billion, or 54 cents per share, for its fiscal fourth quarter, down 45% from the previous year. Revenue fell 10% to $13.64 billion from $15.2 billion.

Future Outlook

For the current quarter, Cisco is forecasting adjusted earnings of 86 to 88 cents per share on revenue of $13.65 billion to $13.85 billion. Analysts are expecting earnings of 85 cents per share on revenue of $13.74 billion. Edward Jones analyst David Heger noted that Cisco is starting to see demand recover, with product orders up 6%, excluding those from its recent acquisition of cybersecurity firm Splunk.

Cybersecurity Initiatives

In addition to its focus on AI, Cisco is making significant strides in cybersecurity. The company launched a cybersecurity readiness index in March to help businesses measure their resilience against attacks. This initiative is part of Cisco's broader efforts to enhance its cybersecurity offerings and support businesses in mitigating risks.

Cisco's decision to cut thousands of jobs and shift its focus to AI and cybersecurity reflects the company's strategic priorities in response to changing market dynamics. With substantial investments in tech startups and partnerships with industry leaders like Nvidia, Cisco aims to position itself at the forefront of technological innovation.

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