by In a move that reflects the increasing job insecurity in the technology industry, Cisco Systems, a pioneer in internet networking, has announced that it will be laying off more than 4,000 employees. The decision comes as many technology companies have resorted to layoffs to boost their profits and stock prices, amidst a shift towards embracing artificial intelligence. The layoffs account for approximately 5% of Cisco’s global workforce of 84,900. This reduction comes on the heels of the company’s earlier cutbacks in late 2022, which resulted in the elimination of 5,000 jobs.
The trend of multiple layoffs within a short span of time has also affected other prominent tech companies such as Google and Amazon, both of which have reduced their workforces multiple times since the end of 2022. Despite being profitable, Cisco reported a decrease in earnings for its fiscal second quarter, earning $2.6 billion, or 65 cents per share, representing a 5% decrease from the previous year. Additionally, the company’s revenue for the same period fell by 6% to $12.8 billion.
Cisco attributes the layoffs to expectations of sluggish sales and demand for its products and software services in the next three to six months. CEO Chuck Robbins stated during a conference call with analysts that customers are exercising caution due to the uncertain economic outlook. The implementation of these layoffs is expected to cost the company an additional $800 million.
The workforce reductions in the tech industry, along with layoffs announced last year, have contributed to increased profitability and market values for these companies. The tech-driven Nasdaq composite index has surged by approximately 50% since the end of 2022, nearing its all-time high reached in 2021, during the pandemic-induced shift towards online services. However, Cisco’s stock price has only experienced a 6% gain during the same period. This modest increase may have influenced the decision to implement deeper payroll cuts compared to other tech companies. As a result of the announcement, Cisco’s shares dropped nearly 6% during extended trading after the release of the quarterly numbers and lackluster forecast.
Despite the wave of layoffs in the tech industry, the United States economy has continued to add jobs at a robust rate, maintaining an unemployment rate of 3.7%, which is just above a half-century low. Like its counterparts, Cisco is focusing on areas of technology that are expected to drive future growth. This adjustment has led to the elimination of positions in some departments while creating more jobs in the field of artificial intelligence (AI). AI is rapidly advancing, and experts anticipate that it will eventually be capable of replacing human workers in various tasks.
Cisco’s CEO, Chuck Robbins, expressed optimism regarding the company’s position in the AI field, citing its close relationship with chipmaker Nvidia, a global leader in AI technology. Robbins believes that Cisco will be well-positioned to capitalize on the technology alongside Nvidia, which has experienced significant success in the past year.
In conclusion, Cisco’s decision to implement layoffs reflects the growing job insecurity in the tech industry, driven by a shift towards embracing AI. Despite being a profitable company, Cisco foresees a period of sluggish demand, resulting in the elimination of over 4,000 jobs. The workforce reductions in the tech industry have contributed to increased profitability and market values, although Cisco’s stock price has seen modest gains. The U.S. economy continues to add jobs at a healthy rate, while companies like Cisco focus on AI as a catalyst for future growth.
*Note:
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it
