In Short:
Cisco, the US tech giant, has laid off thousands of employees due to declining demand and rising costs, following earlier cuts this year. CEO Chuck Robbins expressed optimism for future demand as Cisco shifts focus to high-growth areas like AI and cybersecurity, investing heavily and acquiring Splunk for $28 billion. Overall, tech layoffs in 2023 have exceeded 136,000 across many companies.
The U.S. tech conglomerate Cisco has recently announced significant layoffs, marking its second major job reduction within the year, as reported by TechCrunch. This decision comes in response to decreasing demand and an urgent need for cost-cutting measures amid the company’s heavy investments in artificial intelligence (AI).
Earlier in August, Cisco indicated plans for approximately 7% job cuts, affecting around 5,600 employees, following an earlier layoff in February that impacted 4,000 employees.
“Cisco is optimistic about rebounding demand for our networking equipment,” stated CEO Chuck Robbins. In line with this sentiment, the company is restructuring its operations to focus on high-growth sectors. As part of this strategic shift, Cisco has committed $1 billion to invest in AI startups and further bolstered its position in the cybersecurity domain through its $28 billion acquisition of Splunk.
The anticipated costs associated with the restructuring plan are substantial, projected to reach up to $1 billion before taxes. A significant portion of these costs, estimated between $700 million and $800 million, is expected to be recognized in the first quarter of the fiscal year.
As of the end of its last fiscal year, Cisco employed approximately 85,000 individuals. August saw a wave of layoffs across the tech sector, with over 27,000 employees affected at major firms, including Intel, IBM, and Cisco, as well as various startups. This year, the total number of tech-related layoffs has surpassed 136,000 across 422 companies.
Cisco’s Strategic Resilience Amid Economic Challenges
Focus on Subscription-Based Services
The $28 billion acquisition of Splunk in March highlights a pivotal shift for Cisco towards subscription-based services. This transition represents a significant move for the company, historically known for its networking hardware, as it competes in the dynamic cybersecurity market alongside industry leaders such as Palo Alto Networks, Check Point, CrowdStrike, and Microsoft.
Investment in AI Startups
Since 2018, Cisco has actively engaged in the AI sector, acquiring companies like Accompany and CloudCherry to enhance its technological footprint. In 2019, the company launched the Silicon One ASIC chip, boasting speeds of 25.6 Tbit/s, positioning it in direct competition with Intel and Nvidia.
To further its investment in emerging technologies, Cisco has allocated $1 billion for AI startups and established a partnership with Nvidia, facilitating the incorporation of Cisco’s ethernet technology in data centers and AI applications. Notable investments in AI startups, including Cohere, Mistral AI, and Scale AI, have supplemented Cisco’s strategy, with a total of 20 acquisitions and investments in the AI space over recent years.
Advancing Cybersecurity Measures
Cisco has bolstered its security capabilities since its acquisition of Sourcefire in 2013, a provider known for network security and threat detection. The acquisition of Open DNS in 2015 expanded its cloud-based threat detection services, while CloudLock was integrated into its security offerings for $293 million to safeguard users and data within cloud environments. Additionally, the acquisition of Duo Security for $2.35 billion enhances cloud-based authentication and access control.
