We caught wind earlier this week that Cisco was planning a major cost-cutting operation to reduce its costs by around 15% throughout the month. It looks like the first stage of that is a round of cut jobs, with Cisco announcing as part of its earnings report that it will cut up to 5,500 jobs, or 7% of its workforce.
The move isn’t unexpected as Cisco works to transition to a new era where it can’t simply focus on only building its core networking hardware. The company has been aggressively spending on acquisitions since the beginning of last year, including paying $1.4 billion most recently for Jasper Technologies in a move into managing Internet of Things devices.
“Today, we announced a restructuring enabling us to optimize our cost base in lower growth areas of our portfolio and further invest in key priority areas such as security, IoT, collaboration, next generation data center and cloud,” the company said in a statement. “We expect to reinvest substantially all of the cost savings from these actions back into these businesses and will continue to aggressively invest to focus on our areas of future growth.”
An acquisition like Jasper Technologies is as much a signal in its move to considering a new phase of networking technology, which is its core competency. But the idea of how devices are networked is certainly changing over time, including as the diversity of devices that require some kind of networking continues to expand.
Big rounds of layoffs like this are common as companies look to find new footing in times of transition. Microsoft experienced this in full force as it has laid off a lot of employees under the new leadership of Satya Nadella. It’s not just a question of bringing in new blood and fresh eyes in the form of hires and acquisitions, it’s about rejiggering the structure of the company to promote new ideas and spur innovation — and sometimes that means that roles simply vanish into the ether as things get more streamlined.
All this seemed expected — though the final number came in lower than the reported up to 14,000 expected cuts — as investors barely blinked in extended trading, with Cisco’s stock only falling 1%. The job cuts will start in the first quarter of its next fiscal year.