Cisco Systems, a titan in the networking equipment industry, is bracing for another round of job cuts in 2024. This marks the second major workforce reduction for the company this year, reflecting a strategic shift towards high-growth areas like cybersecurity and artificial intelligence (AI). Insiders suggest these layoffs could mirror or even surpass the 4,000 positions cut in February, with an official announcement expected alongside Cisco’s fourth-quarter earnings report.
A Look Back: The Road to Restructuring
This latest round of job cuts follows an earlier reduction in February, when Cisco trimmed approximately 4,000 employees from its workforce. The primary driver behind this previous move was cost management and resource allocation towards emerging sectors with higher growth potential. As of July 2023, Cisco employed roughly 84,900 individuals; however, this figure doesn’t account for the reductions implemented earlier this year. The upcoming layoffs highlight the challenges Cisco faces as it navigates a rapidly evolving technology landscape.
The decision to cut jobs is part of a broader strategy for Cisco. The company is pivoting away from its core business of routers and switches, which has been struggling with weak demand and supply-chain disruptions. Instead, Cisco is increasingly focusing on cybersecurity and AI, sectors poised to drive future growth.
A significant move in this direction was Cisco’s $28 billion acquisition of cybersecurity firm Splunk in March 2024. This acquisition aims to lessen Cisco’s dependence on one-time equipment sales by bolstering its subscription-based services. Additionally, Cisco has been actively integrating AI into its product offerings, aiming to reach $1 billion in AI product orders by 2025.
Beyond internal development, Cisco’s commitment to AI extends to external investments. In June, the company launched a $1 billion fund to support AI startups such as Cohere, Mistral AI, and Scale AI. Over the past few years, Cisco has made 20 AI-focused acquisitions and investments, showcasing its determination to lead in this emerging field.
The layoffs at Cisco are emblematic of a larger trend sweeping across the tech industry. Companies are increasingly cutting costs to offset hefty investments in AI and other advanced technologies. Since the beginning of 2024, data from Layoffs.fyi reveals that over 126,000 employees across 393 technology companies have been laid off. This trend reflects ongoing economic pressures on the tech sector, forcing companies to reevaluate their workforce needs in the face of shifting business priorities.
Cisco is not alone in implementing significant workforce reductions. Earlier in August, Intel announced layoffs affecting over 15% of its workforce, totaling around 17,500 employees, in an attempt to revitalize its struggling manufacturing business. These widespread layoffs underscore the challenges faced by tech companies as they attempt to balance innovation with economic headwinds and fluctuating market demand.
The news of Cisco’s planned layoffs has already impacted its stock price, which fell nearly 1% following the initial Reuters report. Cisco’s stock performance in 2024 has been lackluster, with a decline exceeding 9% at the time of writing. This downward trend reflects investor concerns surrounding the company’s ability to maintain growth in its traditional hardware business while successfully transitioning to new areas like cybersecurity and AI.
Cisco’s restructuring efforts, including workforce reductions and strategic acquisitions, are critical to maintaining its competitive edge in a challenging market environment. However, these moves are not without risk, particularly if the company fails to generate sufficient returns on investments in AI and other high-growth sectors.
The Road Ahead: Cisco’s Next Steps
With the second round of layoffs in 2024, Cisco is sending a clear message: prioritizing emerging technologies that promise long-term growth. The shift towards cybersecurity and AI represents a strategic response to declining demand in its traditional markets and a necessary adaptation to the rapidly evolving technology landscape.
While these layoffs are undoubtedly difficult for the affected employees, they are part of a broader effort by Cisco to remain competitive and innovate in areas expected to drive future profitability. The company’s success in these new ventures will be closely monitored by investors and industry analysts as Cisco navigates the complex dynamics of the tech sector.
