Since part of a trend that has helped boost their profits and stock prices, Internet networking pioneer Cisco Systems is letting go of more than 4,000 employees. This move serves as a sobering reminder of the job insecurity that hangs over an industry that is increasingly embracing artificial intelligence.
The widespread layoffs, which were revealed on Wednesday along with Cisco’s most recent quarterly earnings, account for around 5% of the company’s 84,900 global workforce. The purge comes after Cisco’s 5,000 job loss in late 2022 and before the company’s $28 billion acquisition of Splunk, which management now projects to close by April 30. Cisco, a business best recognised for producing a large portion of the internet’s connecting infrastructure, estimates that its reorganisation will cost an additional $800 million.
Other well-known tech companies, like Google and Amazon, have also been impacted by the double whammy of two large layoffs in two years. Both companies have reduced their payrolls, which had been gradually increasing, several times since the end of 2022.
The majority of the corporations continue to generate large profits, despite the reductions being made. The San Jose, California-based Cisco reported earnings of $2.6 billion, or 65 cents per share, for its fiscal second quarter, which ended in January. This represents a 5% decline from the same period in the prior year. At $12.8 billion, revenue for the period decreased 6% from the previous year.
However, CEO Chuck Robbins of Cisco stated on a conference call with analysts on Wednesday that the company anticipates slow demand for its software services and products over the next three to six months as its clients exercise “a greater degree of caution” in light of the uncertain economic future.
Cisco’s reorganisation comes after a slew of notable layoffs at Google, Alphabet, Microsoft, TikTok, Riot Games, eBay, and PayPal since the year’s beginning. The labour reductions, when coupled with a wave of layoffs that occurred last year, have enabled the corporations to achieve their goal of raising their already high earnings even further, which has also raised their aggregate market valuations.
The tech-driven Nasdaq composite index has surged by around 50% since the end of 2022, bringing it back within striking distance of its all-time high, which was reached in 2021 when pandemic-related lockdowns caused a greater shift in the economy towards online services.
However, Cisco’s stock price has only increased by 6% over the same time frame, which may have influenced management’s choice to reduce payroll even more than some of the company’s IT competitors. And the majority of that meagre gain now looks certain to disappear, as Cisco’s shares fell by about 6% in Wednesday’s extended trade following the release of its most recent quarterly results and unimpressive projection.
Despite spite of the IT industry’s waves of layoffs, the U.S. economy has been adding jobs at a strong clip, maintaining the nation’s unemployment rate at 3.7%, which is slightly over a half-century low.
Like its competitors, Cisco is narrowing its focus to the areas of technology most likely to generate growth in the future. This move has led to many tech companies cutting staff in some departments while adding jobs in the still-developing field of artificial intelligence (AI), which is starting to gain the knowledge necessary to perform tasks that have historically required a human brain.
Experts predict that AI will soon be able to perform even more tasks, leading to an increase in the number of workers laid off who will no longer be needed.
Robbins praised Cisco’s strong partnership with Nvidia, a chipmaker whose expertise in artificial intelligence has made it one of the most valuable businesses in the world in the last year, as evidence that Cisco will be well-positioned to benefit from the technology as well.
“We are clear beneficiaries of AI adoption,” Robbins said.
