Cisco will lay off 5% of its workforce, it has announced. The job cuts, which would amount to 4,250 jobs, followed disappointing quarterly results from the networking giant. Though the layoffs followed Cisco’s posting of stronger-than-expected revenues of $12.79bn, net income fell and negotiations to acquire security firm Splunk have yet to conclude. As such, Cisco adjusted its revenue guidance for the next quarter to between $12.1-$12.3bn, and between $51.5-$52.5bn for the full fiscal year – below analyst expectations.
“In terms of the macro environment, we are seeing a greater degree of caution and scrutiny of deals given the high level of uncertainty,” said Cisco’s chief executive, Chuck Robbins, during the company’s earnings call with investors. “As we’re hearing this from our customers, it’s leading us to be more cautious with our forecast and expectations.”
Cisco layoffs in keeping with broad uncertainty across business tech
The Cisco layoffs will surprise few observers of the business technology ecosystem, following as it does similar announcements from SAP, Amazon and Microsoft. The networking giant has, however, been buffeted by its own headwinds. Cisco’s revenue from its core networking products, for example, stood at $7.08bn, compared to the $7.10bn expected by market analysts. This may be attributed to a temporary decline in demand, said Robbins, as end users install all the equipment they bought last year.
“Customers have been taking time since the start of our fiscal 2024 to deploy the elevated levels of products shipped to them in recent quarters,” he said. “We think they’ve got probably in excess of 20-plus weeks of inventory that they’re working through right now.”
Splunk acquisition proceeding slowly
Another factor contributing to uncertainty surrounding Cisco’s revenues is its protracted acquisition of security software vendor Splunk – though the impact of this particular deal was excluded from the former’s financial forecast for 2024. Cisco agreed a $28bn deal to buy Splunk in September 2023, but as with many deals of this size, its closure remains contingent on the approval of international regulators. News on whether this will be forthcoming from the EU’s competition watchdog will arrive by 13 March.
If approved, Cisco’s deal to acquire Splunk is expected to reduce its reliance on its networking arm and allow it to use AI to protect threats to its customers more effectively. “From threat detection and response to threat prediction and prevention, we will help make organisations of all sizes more secure and resilient,” said Robbins when the deal was first announced. Cisco has also, of late, been keen to diversify its networking portfolio with more experimental technologies. Just last month, for example, the firm announced a new collaboration with Cambridge-based startup Nu Quantum to bring quantum computing networking technology to data centres.
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