Cisco Systems Inc. is gearing up for a new round of layoffs that could hit more than 4,000 workers, Reuters reported today.
The report comes six months after the networking giant let go a similar number of employees in a restructuring initiative. The initiative cost Cisco about $800 million, mostly in the form of severance costs and other offboarding expenses. The company stated at the time that the job cuts were meant to facilitate “further investment in key priority areas.”
Reuters’ sources indicated that the company could announce the latest layoffs as soon as next Wednesday, when it’s scheduled to report quarterly results. Cisco is heading into earnings week following several months of slow demand for its network equipment. That reduced demand, and the associated revenue decline that the company experienced, may be the driving factor behind its decision to cut jobs.
In February, Cisco Chief Executive Officer Chuck Robbins attributed the decreased demand to two main factors. He said that there was “greater degree of caution and scrutiny of deals” because of macroeconomic uncertainty. Additionally, Robbins detailed that many customers still had unused network equipment left over from previous purchases.
Cisco disclosed at the time that some customers had more than 20 weeks worth of excess inventory. Those 20 weeks have since passed, which may be starting to revitalize the company’s financial performance.
Cisco reported a 27% year-over-year drop in networking revenue last quarter. However, the company also upped its full-year sales forecast by more than $1 billion to between $53.6 billion and $53.8 billion. Chief Financial Officer Scott Herren has stated that Cisco expects to return to growth in fiscal 2025 with an annual sales increase in the low- to mid-single digits.
In the longer term, the company is also counting on its recent $28 billion acquisition of Spunk Inc. to support revenue growth. Splunk sells a popular suite of data processing tools that companies use to detect cyberattacks and infrastructure outages. Cisco estimates that 5,000 of its customers could “become meaningful Splunk customers” and has already begun rolling out upselling offerings.
When the networking giant first announced the acquisition last September, it predicted that Splunk would bring about $4 billion in annual recurring revenue. Cisco also projected that the deal would become accretive to its adjusted gross margin in its 2025 fiscal year.
Other data center suppliers are also making workforce reductions as part of their efforts to improve their financial performance. On Monday, Dell Technologies Inc. disclosed plans to restructure its sales and marketing groups. Last week, Intel Corp. announced that it’s cutting 15,000 jobs to unlock $10 billion in savings by 2025.