Cisco announces $600M restructuring plan, including layoffs

Cisco today said it will take a $600 million charge associated with layoffs and restructuring of its businesses. 

In an 8-K filing for its fiscal first-quarter, the company announced a restructuring plan “in order to rebalance the organization and enable further investment in key priority areas. This rebalancing will include talent movement options and restructuring.” The company said it will make some real estate changes as well.

During a financial call with analysts, CEO Chuck Robbins talked briefly about the restructuring but said employees will hear more details on Thursday.

“I’d be reluctant to go into a lot of detail here until we’re able to talk to [employees]. I would say that what we’re doing is rightsizing certain businesses,” Robbins said. 

Cisco is focused on moving resources into the enterprise networking space and accelerating its platform strategy, Robbins added. “We will be making significant investments in security and beefing up our teams there, and the capacity to continue to innovate there. Those are important areas,” he said.

CFO Scott Herren also commented on the restructuring plan:

“And to be clear [about] this: Don’t think of this as a headcount action that is motivated by cost savings. This really is a rebalancing. As we look across the board, there are areas that we would like to invest in more. Security, our move to platforms, and more cloud-delivered products. But we’re also going to maintain our financial discipline as we do that,” Herren said.

“This is about rebalancing across the board. In a perfect world, you’d have 100% skill match, and you can take the people in the areas, or the skills in certain areas, and just move them to where we need to invest, and unfortunately, that’s not – it’s not a perfect world,” Herren said.

Cisco layoffs follow cuts at other tech companies

Cisco isn’t alone among tech players announcing layoffs these days. Twitter, Amazon, Meta, Salesforce, F5 and many others have been reducing headcounts in recent weeks.

The news came as Cisco announced what Robbins said is the largest quarterly revenue in the company’s history: $13.6 billion, which represents an increase of 6% compared to the year-ago quarter.

The company is still being impacted by supply chain shortages, but Robbins said that is easing – if only a little bit.

“The easing of supply constraints and our ability to deliver hardware is now releasing software subscriptions that were sitting in backlog connecting to unshipped hardware,” Robbins said.

“Like you’ve heard from others in the industry, we are encouraged by what we are seeing, with modest improvement in certain component availability as shortages continue to ease from last quarter. The redesign of many of our products has also helped bring supply stability and more resiliency.”

Supply chain challenges have pushed most major networking players, including Cisco, Juniper, Arista and others, to redesign or re-engineer some products in an attempt to overcome component shortages and deliver products to customers.