Dive Brief:
- In a press release Wednesday, Cisco announced plans to lay off 5,500 employees, or approximately 7% of its workforce, as part of a restructuring effort.
- Cisco currently has about 74,000 workers total.
- The company announced the restructuring during its fourth quarter earnings report, which showed total revenue was up 2% to $12.6 billion, with product revenue up 1% and service revenue up 5%.
Dive Insight:
"Today's market requires Cisco and our customers to be decisive, move with greater speed and drive more innovation than we've seen in our history," Cisco stated in a press release. "Today, we announced a restructuring enabling us to optimize our cost base in lower growth areas of our portfolio and further invest in key priority areas such as security, IoT, collaboration, next generation data center and cloud."
The press release went on to explain that the company expects to take action under this plan beginning in the first quarter of fiscal year 2017.
As the market shifts, Cisco has struggled to maintain its revenue stream. Revenue for Cisco’s core businesses—switching and routing systems— has been steadily weakening.
In June, Cisco CEO Chuck Robbins said the company intends to create and begin testing a new network software subscription model. Under Robbins, Cisco has become increasingly interested in subscription-based services, where it can maintain steady income as demand for its traditional hardware continues to cool.
Robbins recently noted that the company’s customers are beginning to upgrade hardware less frequently. At the same time, new competitors are offering cheaper products to undercut the networking giant.
