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Understanding Cisco's Layoffs - A Comprehensive Overview of the Business

Understanding Cisco's Layoffs - A Comprehensive Overview of the Business

  Cisco, the global leader in router and switch hardware manufacturing, announced this week its $600 million restructuring plan, which covers severance pay, real estate-related charges and other charges to employees. Silicon Valley is currently in a period of recalibration and belt tightening, as Amazon, Twitter and Meta have announced layoffs this year. Networking This week's first wave of Cisco layoffs targeted employees working in networking - an area the company has long dominated. These employees build routers and switches; develop wireless solutions; work on video products; assist businesses in setting up networks as their businesses expand; as well as developing software to make these networks run more efficiently. Networking division of Cisco has not been particularly profitable of late, yet remains an integral component of their business. Cisco recently saw quarterly revenue surge 6% higher than predicted thanks to an ease in supply chain restrictions and higher component prices that allowed them to reduce backlogs while increasing prices; yet networking business is expected to remain only a relatively minor contributor of overall revenues. Cisco disclosed in its financial filing that its restructuring will cost it an estimated total of $600 million, including one-time costs such as severance pay and real estate-related charges. Cisco anticipates savings over time through reallocating staff into more strategic areas like security and enterprise networking as well as speeding up its platform strategy plan. No official details have yet been released about which departments will face job cuts; however, according to someone familiar with the matter told CRN that multiple teams in both Amazon Stores and PXT (People Experience and Technology Solutions) groups were affected. None of those affected are union members with valid bumping rights for other open positions, according to this source. Cisco has historically undertaken operations restructuring by divesting non-essential businesses from its strategy. For instance, it sold off its cable set-top box plant in Mexico and discontinued Flip videocamera operations to focus on five key markets such as routing/switching/services, security, data center/cloud/virtualization, collaboration and architectures. CEO Chuck Robbins gave an indication of where the company might direct its efforts in its next earnings call when discussing 5G strategy. Although no specific details were offered, Robbins mentioned how 5G requires different skill sets within a company to take full advantage of opportunities presented. It remains to be seen if that will mean adding engineering jobs or making other adjustments. Security Cisco announced on January 10 that they are cutting around 4,000 employees from their workforce - roughly 6% of its headcount. Though layoffs at major tech companies such as Cisco may be commonplace, it still impacts workers and their families deeply. Amazon, Meta, and Salesforce have all seen similar reductions of staff over recent weeks. Cisco CEO Chuck Robbins recently issued a memo to staff outlining that company is restructuring its portfolio to invest in key priority areas, such as security, wireless and cloud, while continuing to generate strong financial results. Network giant AT&T announced it would begin planning for layoffs in December 2022, when it announced a commitment to cut 4,100 positions - representing approximately 5% of their workforce - according to company representatives. Unfortunately, no information is currently available as to the exact number of workers affected by this move. Noteworthy is Cisco's revenue growth. Recently, they reported quarterly revenues of $13.6 billion -- up 6% year over year -- but their earnings report revealed a major supply chain issue which the company has yet to address effectively. Reports indicate that due to an evident shortage of parts, the company has been having difficulty getting its hardware into customers' hands on time - leading some customers to postpone purchasing products they need altogether. Due to delays and uncertainty, Cisco has seen some of its core networking hardware sales stagnate in recent months. While attempts have been made to increase sales via wireless and collaboration software platforms, these have not yet managed to offset losses sustained within its core business. As the company works through these obstacles, it may implement further cuts in order to remain competitive in its markets. For example, divesting its stake in IoT (Internet of Things), which hasn't fared particularly well at present may be necessary or purchasing a storage firm would complement their current data center and network fabric architecture of compute, networking and storage integration. Data Center A data center is an energetic hub where servers and storage devices work in concert to run technology, requiring secure, available, and efficient operations for businesses to make use of them. Today's data centers can be found everywhere: on-prem, cloud or network edge; growing larger with each passing year yet cheaper to operate due to standardization in technology. These trends are altering the job market for workers who support these facilities, including tech workers. Some tech employees are being laid off, and many may not know what it means to face a layoff or find new employment, according to experts. Many fear automation will replace them; 37% of Americans report experiencing job loss anxiety. Dr. Gary Jantz, an expert in workplace stress and professor at University of California Davis. Simply stated, betrayal occurs when someone you trust betrays it and can have serious ramifications on mental health - including feelings of rage, resentment and bitterness as well as desire to seek revenge or take retaliatory measures against their accuser(s). Cisco is undertaking a $600 million restructuring plan, which includes data center layoffs as part of their savings initiative and selling office space and staff reshuffle. According to senior managers, this savings initiative is necessary as they look for ways to meet increasing customer demands while controlling costs and reducing debt. Chuck Robbins, CEO of Cisco, indicated in a call with analysts that his company would focus on its strengths. Although no details were given, Robbins noted that investments will still go towards software and core networking products, while it would shift business by selling off certain nonperforming products (Flip video camera manufacturing was recently sold off and cable set-top box production may also be affected). Neither Robbins nor Cisco provided information as to which product lines may be affected by this decision. Software Tech industry news headlines have recently featured layoffs at major IT companies, with Cisco being among them. Employees may feel anxious about their job security but should take heart that things may not be as bad as first appear. Cisco has been making both cuts and hires, not disclosing exactly how many jobs will be cut or created; but does promise severance packages to employees who may be affected. Cisco's layoffs are part of its larger shift away from hardware-focused products towards software-centric offerings. The move is being driven by service provider efforts to transform networks with services like SD-WAN and SDN; at the same time, Cisco is strengthening its portfolio through acquisitions like Sourcefire while looking to increase revenue streams such as collaboration software and wireless services. As the company shifts towards software services, they face new challenges: offering higher margins than on hardware requires finding ways to reduce overhead costs while increasing revenues through subscription sales, according to Endpoint Technologies Associates analyst Roger Kay. As part of their plan to shift its portfolio, Cisco plans on cutting jobs from various departments. According to reports on Blind, some employees within Application Centric Infrastructure, Collaboration, Data Center Services & Solutions, Webex, and Security Business Group have already been informed they will be laid off. Cisco typically engages in mass layoffs around July, but with Chuck Robbins' appointment as CEO this past July it postponed this annual tradition. Now Cisco plans on cutting headcount by an estimated 5,000 and this may occur through a combination of buyouts and layoffs; details on exact figures should become known after reporting its fiscal first-quarter results Thursday after market close.

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