Cisco unveiled plans to realign its workforce over the coming months to capitalize on key growth opportunities, looking to strengthen its enterprise networking, security and platform offerings. But the pivot won’t come cheap. The company noted in financial filings it expects to spend a total of $600 million on the move, with half of that outlay coming in the current quarter.
The restructuring will include the shuffling, layoff and hire of new talent and the slimdown of its real estate portfolio to reflect an increase in hybrid work. A company representative told Fierce the plan will impact about 5% of its workforce. As of July 30, 2022, the company had approximately 83,300 full-time employees, meaning approximately 4,100 people will lose their jobs.
But the representative noted Cisco will be hiring for other roles and expects to end its current fiscal year with “roughly the same” number of employees as it had at the start.
“This decision was not taken lightly, and we will do all we can to offer support to those impacted, including generous severance packages, job placement services and other benefits wherever possible,” the representative said. The job placement assistance will include doing “everything we can do” to help affected employees step into other open positions at the company, the representative added.
Cisco similarly implemented a restructuring plan in mid-2020 which included a substantial number of layoffs.
While the representative declined to disclose what departments would feel the most impact this go around, Cisco CFO Herren and CEO Chuck Robbins stated on an earnings call on Wednesday the company is looking to put more resources behind its enterprise networking, platform, security and cloud-based products.
During the call, Herren urged analysts not to “think of this as a headcount action that is motivated by cost savings. This is really a rebalancing.” He added that in an ideal world, the company would simply be able to move employees from one area to another, but the reality is that there will be some degree of skills mismatch.
Between severance, real estate-related and other costs, Cisco said in a financial filing it expects the restructuring to cost a total of $600 million. Around $300 million of that will be spent in its fiscal Q2 2023 which roughly aligns with calendar Q4 2022. Another $200 million will be spent in the 2H of its fiscal 2023 (roughly the first half of calendar 2023), with the remaining $100 million coming in the first quarter of its fiscal 2024, which should cover August through October of 2023.
Earnings
The restructuring announcement came as Cisco reported results for FQ1 2023, covering the three months ended October 29, 2022. Consolidated revenue of $13.6 billion was up 6% year on year, but net income fell 10% to $2.7 billion.
By product, Secure, Agile Networks revenue was up 12% to $6.6 billion, End-to-End Security grew 9% to $971 million and Optimized Application Experiences increased 7% to $193 million. Sales in Internet for the Future fell 5% to $1.3 billion, Collaboration was down 2% to $1.08 billion and Other Products revenue plummeted 47% to $2 million. Services revenue was flat at $3.39 billion.