Cisco Systems announced on Wednesday that it will be reducing its global workforce by 7% as part of a strategic shift towards high-growth areas. The company, based in San Jose, California, anticipates incurring pre-tax charges of up to $1 billion related to this plan, with a significant portion of $700 million to $800 million expected to be recognized in the first quarter.
This latest round of layoffs follows a previous workforce reduction earlier this year when Cisco disclosed its intention to cut 5% of its global workforce, amounting to over 4,000 jobs, while also revising its annual revenue target downwards.
Despite these workforce adjustments, Cisco's shares surged by 5% in after-hours trading following its optimistic forecast for first-quarter revenue. The company projects revenue between $13.65 billion and $13.85 billion for the upcoming quarter, surpassing analysts' average expectation of $13.71 billion.
Cisco, known as the leading manufacturer of routers and switches for internet traffic management, has been facing challenges due to sluggish demand and supply-chain limitations in its core business. To address this, the company has diversified its portfolio, including the recent $28 billion acquisition of cybersecurity firm Splunk, completed in March. This strategic move aims to reduce reliance on one-time equipment sales by strengthening its subscription-based business.
Scott Herren, the Chief Financial Officer of Cisco, emphasized the company's commitment to growth and operational excellence, particularly in the areas of artificial intelligence, cloud computing, and cybersecurity. Cisco also launched a $1 billion fund in June to invest in AI startups, building on its track record of 20 AI-focused acquisitions and investments in recent years.
In its fourth-quarter financial report ending on July 27, Cisco reported revenue of $13.64 billion, exceeding the estimated $13.54 billion. The company's adjusted profit per share stood at 87 cents, surpassing the anticipated 85 cents.
