SAN FRANCISCO (AP) — Web networking pioneer Cisco Systems is jettisoning greater than 4,000 employees, joining the parade of technology corporations in a trend that has helped boost their profits and stock prices while providing a sobering reminder of the job insecurity hanging over an industry increasingly embracing artificial intelligence.
The mass layoffs announced Wednesday together with Cisco’s latest quarterly results represent about 5% of its worldwide workforce of 84,900. The purge follows Cisco’s late 2022 cutbacks that shed 5,000 employees and ahead of its $28 billion acquisition of Splunk, a deal that management now expects to complete by April 30. Cisco — a corporation best known for making much of the technology that connects the net — expects its reorganization to cost an additional $800 million.
The double whammy of two big layoffs in two years has been a phenomenon affecting other distinguished technology corporations, corresponding to Google and Amazon, each of which have trimmed their once-steadily growing payrolls multiple times because the top of 2022.
The reductions are being made though a lot of the firms are still big moneymakers. Cisco, which is based in San Jose, California, earned $2.6 billion, or 65 cents per share, during its fiscal second quarter covering October-January, a 5% decrease from the an identical time in the midst of the previous 12 months. Revenue for the period fell 6% from the prior 12 months to $12.8 billion.
But Cisco foresees sluggish demand for its products and software services in the midst of the following three to six months while its customers exercise “a greater degree of caution” amid an uncertain economic outlook, CEO Chuck Robbins said Wednesday during a conference call with analysts.
Cisco’s streamlining follows a succession of great layoffs since the starting of the 12 months at Microsoft, TikTok, Riot Games, eBay and PayPal, together with each Google and Alphabet. Combined with a wave of layoffs last 12 months, the workforce reductions have helped the companies lift their already lofty profits even higher — a goal that has also elevated their collective market values.
Because the top of 2022, the tech-driven Nasdaq composite index has soared by about 50% in a rally that has put it back close by of its all-time high hit in 2021 when pandemic-driven lockdowns shifted more of the economy to online services.
But Cisco’s stock price has gained just 6% in the midst of the identical period, a component which may need played into management’s decision to make even deeper payroll cuts than quite a lot of the corporate’s tech brethren. And most of that paltry gain now appears poised to evaporate, with Cisco’s shares shedding nearly 6% in Wednesday’s prolonged trading after its latest quarterly numbers and lackluster forecast came out.
Despite the waves of layoffs washing over the tech industry, the U.S. economy has continued in order so as to add jobs at a robust rate that has kept the country’s unemployment rate at 3.7%, just above a half-century low.
Like its peers, Cisco may be sharpening its give attention to areas of tech likely to provide future growth — an adjustment prompting many tech corporations to eliminate positions in some departments, while creating more jobs throughout the still-nascent field of artificial intelligence, or AI, which is becoming knowledgeable enough to start out tackling tasks that traditionally required a human brain.
Experts expect AI to eventually offer you the possibility to do rather more work and trigger more layoffs of people who won’t be essential to employ in the long term.
Robbins hailed Cisco’s close relationship with chipmaker Nvidia, whose leadership in AI has transformed it into one in every of the world’s most respected corporations in the midst of the past 12 months, as a sign that it will even be well positioned to capitalize on the technology, too.
“We’re clear beneficiaries of AI adoption,” Robbins said.