SAN FRANCISCO (AP) — Internet networking pioneer Cisco Systems is shedding more than 4,000 employees, joining a parade of technology companies in a trend that has helped boost its profits and stock prices while offering a sobering reminder of the job insecurity that increasingly looms over the industry. Embrace artificial intelligence.
The mass layoffs announced Wednesday in conjunction with Cisco's latest quarterly results represent about 5% of its worldwide workforce of 84,900 employees. The purge comes on the heels of Cisco's late-2022 cutbacks that led to 5,000 layoffs and ahead of its $28 billion acquisition of Splunk, a deal management now expects to complete by April 30. It expects its reorganization to cost an additional $800 million.
The double whammy of massive layoffs in two years has been a phenomenon that has affected other prominent tech companies, such as Google and Amazon, both of which have cut their salaries that had been growing steadily several times since the end of 2022.
The cuts are being made even though most companies are still making significant profits. Cisco, headquartered in San Jose, Calif., earned earnings of $2.6 billion, or 65 cents per share, during its fiscal second quarter covering the October-January period, down 5% from the same period a year earlier. Revenue for the period fell 6% from the previous year to $12.8 billion.
But Cisco expects demand for its software products and services to slow over the next three to six months while its customers exercise “a greater degree of caution” amid an uncertain economic outlook, CEO Chuck Robbins said Wednesday during a conference call with analysts.
Cisco simplification follows A series of large layoffs Since the beginning of the year at Microsoft, TikTok, Riot Games, eBay, PayPal, as well as Google and Alphabet. Combined with a wave of layoffs last year, workforce cuts have helped companies push their already soaring profits even higher — a goal that has also lifted their collective market values.
Since the end of 2022, the tech-driven Nasdaq Composite has risen about 50% in a rally that took it back to all-time highs in 2021 when pandemic lockdowns shifted more of the economy online. Services.
But Cisco's stock price rose just 6% over the same period, a factor that may have played a role in management's decision to take deeper pay cuts than some of the company's tech brethren. Most of those slim gains now appear to be about to evaporate, with Cisco shares falling nearly 6% in extended trading on Wednesday after its latest quarterly numbers and lackluster outlook came out.
Despite waves of layoffs sweeping through the tech industry, the US economy has continued to add jobs at a strong rate that has kept the country's economy growing. Unemployment rate at 3.7%just above the lowest level in half a century.
Like its peers, Cisco is also increasing its focus on areas of technology most likely to produce future growth — an adjustment that has led many tech companies to cut jobs in some divisions, while also creating more jobs in the still-nascent field of artificial intelligence, or artificial intelligence. , which became knowledgeable enough to begin tackling tasks that traditionally required a human brain.
Experts predict that AI will eventually be able to do more work and cause more layoffs for people who will not need to be hired in the future.
Robbins hailed Cisco's close relationship with chipmaker Nvidia, whose leadership in artificial intelligence has turned it into one of the world's most valuable companies over the past year, as a sign that it would also be well-positioned to benefit from the technology as well.
“We are clear beneficiaries of the adoption of AI,” Robbins said.
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