Cisco to cut 7% global workforce in fiscal year 2017

18 Aug 2016 | By Akriti Asthana
Cisco's transition from hardware to software

On Wednesday, Cisco announced that it will cut 5,500 jobs by the end of October which will affect about 7% of its global workforce.

The company said that the cuts would allow it to "optimize cost base in lower growth areas of their portfolio and further invest in key priority areas such as security, internet of things, collaboration, next generation data center and cloud".

In context: Cisco's transition from hardware to software

Cisco Systems, Inc.

Cisco was founded in December 1984 by Leonard Bosack and Sandy Lerner. Headquartered in San Jose, California, it is a multinational corporation technology company that designs, manufactures and sells networking-equipment worldwide. It is the world's largest networking company with a workforce of about 72,000 employees.

18 Aug 2016Cisco to cut 7% global workforce in fiscal year 2017

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Favoring software over hardware

Market ShiftFavoring software over hardware

The cuts are in response to the changing businesses scenario where a transition is being made in IT from hardware to online cloud computing, to shed costs and hire employees with new talents.

The jobs losses will begin in early FY 2017 which will cost Cisco $700m in termination payments.

They did not state where in the world the job cuts would mostly fall.

Change in StrategyCisco's efforts to revamp

Cisco has been investing in products like data analytics software and cloud-based tools for data centres to reduce the impact on its network-switches and routers business.

It has been working on providing services such as forms of conferencing, collaboration and security offerings.

Cisco has made 10 acquisitions since Chuck Robbins became its CEO, from Internet-of-Things startup Jasper Technologies to cloud security provider CloudLock.

RevenuesCisco's earnings report

Cisco said its fourth-quarter switching revenue rose 2%, while revenue in routing business fell 6%.

Over all, Cisco's fourth-quarter profit rose 21% on a 1.6% revenue drop as it tightened expenses in multiple areas.

Shares of the company fell 1% in after-hours trading.

Profit climbed to $2.81 billion, 56 cents a share, from $2.32 billion and revenue fell to $12.64 billion from $12.84 billion.

Effects at homeImpact on India

Cisco's job layoff might also affect India as it accounts for 11,000 or 15% of its total workforce of 70,000 employees, as of 30 April 2016.

The company's India operations, particularly the R&D establishment founded in 2007 which is the biggest outside Cisco's San Jose facility with 7,000 engineers, also called the Globalization Centre East, is expected to be significantly impacted.

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Similar lay-off announcements in 2016

In July, Microsoft announced about 2,850 job cuts, taking its total planned lay-offs to upto 4% of its workforce. HP Inc said in February it would cut about 3,000 jobs by the end of fiscal 2016. Intel announced plans to trim 12,000 jobs in April.