In a significant move, Cisco Systems is preparing for another round of layoffs, marking the second major workforce reduction this year. The renowned US-based networking equipment manufacturer is set to cut thousands of jobs as it shifts its focus towards higher-growth areas such as cybersecurity and artificial intelligence (AI). This decision comes amidst a broader trend in the tech industry, where companies are increasingly investing in AI while managing costs through workforce reductions.
Focus on Cybersecurity and AI
Cisco’s strategic pivot towards cybersecurity and AI is a response to the evolving demands of the tech industry. The company has been grappling with sluggish demand and supply-chain constraints in its traditional business of routers and switches. By investing in cybersecurity and AI, Cisco aims to diversify its portfolio and reduce its reliance on one-time equipment sales. The recent $28 billion acquisition of cybersecurity firm Splunk is a testament to this strategy. This move is expected to boost Cisco’s subscription business, providing a more stable revenue stream.
The layoffs, which could affect a similar or slightly higher number of employees than the 4,000 laid off in February, are part of this broader strategy. The company is also making significant investments in AI startups, with a $1 billion fund launched in June to support companies like Cohere, Mistral AI, and Scale AI. These investments are aimed at integrating AI products into Cisco’s offerings, with a target of $1 billion worth of AI product orders by 2025.
Impact on Employees and Market Reaction
The announcement of the layoffs has understandably caused concern among Cisco’s workforce. The company employed around 84,900 people as of July 2023, not accounting for the February layoffs. The upcoming job cuts are expected to be announced alongside the company’s fourth-quarter results. This news has already had an impact on Cisco’s stock, which fell nearly 1% following the initial reports of the layoffs. The stock has been down over 9% this year, reflecting the broader challenges faced by the company.
The layoffs are part of a larger trend in the tech industry, where over 126,000 people have been laid off across 393 tech companies since the start of the year. Companies are increasingly citing AI as a reason for these job cuts, as they shift their focus towards more profitable and innovative areas. Cisco’s decision to cut jobs while investing heavily in AI and cybersecurity is a clear indication of this trend.
Future Prospects and Strategic Goals
Looking ahead, Cisco’s strategic goals are centered around innovation and growth in high-demand areas. The company’s investments in AI and cybersecurity are expected to drive future growth and provide a competitive edge in the market. The $1 billion AI fund and the acquisition of Splunk are key components of this strategy. By focusing on these areas, Cisco aims to overcome the challenges posed by its traditional business and position itself as a leader in the tech industry.
The company’s efforts to incorporate AI into its offerings are already showing promise. In May, Cisco reiterated its target of $1 billion worth of AI product orders by 2025. The investments in AI startups and the launch of new AI products are expected to contribute significantly to this goal. As the tech industry continues to evolve, Cisco’s focus on innovation and strategic investments will be crucial in maintaining its competitive position.
