Layoffs continue in Silicon Valley.
The latest company to join the technology cuts has been Cisco, the largest manufacturer of telecommunications network equipment, which has announced a restructuring plan that will affect approximately 5% of the global workforce.
Since according to the latest data published by the company, the number of employees of the computer giant exceeds 80,000, this will translate into more than 4,000 layoffs, although the company has not specified this.
Cisco has told the US Securities and Exchange Commission (SEC) that the purpose of the restructuring plan is to “realign the organization and enable greater investment in key priority areas.”
The company estimates that it will recognize pre-tax charges in its results of approximately 800 million dollars (about 750 million euros at the current exchange rate) for severance payments and other benefits and costs.
“Cisco expects to take the majority of these actions in the third quarter of fiscal 2024 and recognize approximately $500 million of these charges.
Cisco expects approximately $150 million of these charges to be recognized in the fourth quarter of fiscal year 2024, with the remaining amount of these charges primarily through the first half of fiscal year 2025, the company has indicated to the supervisor.
Cisco's fiscal year runs from August to July, so its third fiscal quarter is the current one, from February to April, and its fourth is from May to July.
The company announced the layoffs on the day it presented its quarterly accounts, which show a 6% drop in revenue, to $12,791 million, and a 5% decline in net profit, to $2,634 million.
In the accumulated first half of its fiscal year (from August to January), billing still grows by 1%, to $27,459 million, and profit increases by 15%, to $6,272 million.
Cisco expects sales to be between $12.1 billion and $12.3 billion in the fiscal third quarter ending in April, below what analysts expected.
Excluding certain items, earnings will be 84 to 86 cents per share, versus a forecast of 92 cents.
For fiscal 2024, the company forecasts revenue of $51.5 to $52.5 billion and adjusted earnings per share of $3.68 to $3.74, in both cases below what the market expected.
Shares of Cisco, a company valued at just over $200 billion, fell more than 5% after normal trading hours after results and forecasts disappointed investors.
In the last 12 months, the company has barely appreciated 4% while the price of large technology companies has skyrocketed.
“We continue to direct our investments towards future growth opportunities.
“Our innovation sits at the center of an increasingly connected ecosystem and will play a critical role as our customers embrace AI and secure their organizations,” said Chuck Robbins, president and CEO, in a statement.
Part of technological spending is moving from communications networks to microprocessors and computing, within the fever for generative artificial intelligence.
Customers are concerned about the state of the economy, leading them to delay orders and rethink the amount of equipment they may need, Robbins told analysts on a conference call.
“Customers are delaying orders and paying a little more attention to them,” he said, according to Bloomberg.
Orders have fallen 12% in the second quarter.
Cisco joins technology companies that are laying off employees.
According to Layoffs.fyi, which has been tracking workforce cuts in the technology sector since the pandemic, almost 35,000 layoffs have been announced in the month and a half of 2024. On the list are Google, Microsoft, Amazon, Zoom, Meta, Uber, Snap, Just Eat, eBay, SAP, Citrix, PayPal, iRobot and Salesforce.
In 2023, that website counted 262,000 layoffs in more than 1,000 technology companies.
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