Cisco says it will address the downsizing with its employees on Thursday. The tech giant also plans to shrink its real estate footprint of smaller office locations, executives said.
Cisco Systems announced on Wednesday that it plans to lay off employees and reduce some of its real estate as the company right-sizes some of its businesses.
Cisco CEO Chuck Robbins joined the tech giant’s Q1 2023 conference call to confirm plans to “realign” certain business areas, including its collaboration segment. Employees will be notified of the upcoming job cuts on Thursday, Robbins said.
“Nothing is lower priority, but we are sizing certain businesses,” Robbins said of the company’s extensive portfolio.
The San Jose, California-based company expects pre-tax charges of approximately $600 million in connection with its plan. The fees, which are primarily cash-based, consist of severance and other severance payments, real estate-related fees, and other costs. Cisco expects to recognize approximately $300 million of these charges in the second fiscal quarter of 2023, approximately $200 million in the second half of fiscal 2023 and the remaining amount in the first quarter of fiscal 2024.
As of July 30, Cisco had 83,300 full-time employees, according to a government filing. Cisco declined to disclose how many employees would be affected by the upcoming job cuts or what other business areas would be affected.
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Cisco CFO R. Scott Herren added that the upcoming layoffs are not downsizing driven by cost savings. “It’s a realignment across the board,” he said.
In fact, Cisco plans to move some laid-off employees to current job openings in other lines of business based on their skills, Robbins said. “If you look at the number of jobs we’ve created in the areas we plan to invest in, it’s only slightly less than the number of people we think will be affected. We will work really hard to align our people with these roles.”
The CEO also said that Cisco will increase investments in strategic areas, including its end-to-end security segment.
Cisco’s collaboration segment declined 2 percent year-over-year to $1.09 billion in revenue for the first quarter of 2022, which the company attributed to declines in meetings offset by growth in cloud calling and contact centers became.
Robbins described the Cisco collaboration business as strong, particularly in the areas of calling and contact centers.
“I’m actually bullish on our collaboration portfolio over the next 12 months,” Robbins said. “I find [the team] built the best platform in the industry and if you look at our devices and interoperability with Microsoft, that’s a huge factor for flexibility from a customer perspective. So I think they did a good job. And I feel like I’m feeling pretty good about this business.”
The latest news of Cisco’s layoffs comes as a number of tech companies have announced job cuts amid macro headwinds.