Cisco plans to lay off thousands of employees to shift focus on "high-growth areas," as reported by Reuters on Friday.

Upcoming Cisco's Layoffs Prioritizing Key Growth

As of fiscal 2023, Cisco employs a total of 84,900 workforce. The company has not yet filed a Worker Adjustment and Retraining Notification (WARN), but the reported layoff might be announced next week as the company prepares for February 14's earnings call.

Cisco issued layoff notices to about 5% of its workforce in 2022, affecting around 4,000 employees in key business segments to "rebalance" and save costs. It has also reduced its real estate footprint by closing smaller office locations as part of the restructuring.

Cisco chose not to comment before publication.

The move comes as tech companies, such as Nokia and Ericsson, cut thousands of jobs last year to cut costs, along with big tech firms like Amazon, Alphabet, and Microsoft, which have carried out layoffs in recent weeks.

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The Main Driver of Slowing Networking Equipment Demand

Cisco lowered its full-year revenue and profit forecasts in its last earnings call, indicating a slowdown in demand for its networking equipment, attributing its weakness to a slowdown in first-quarter orders when customers are focused on installing and implementing products in their environments, prompting them to accelerate its focus on cybersecurity and boost its market share in the security space. 

In Cisco's latest fiscal quarter, its Security segment grew by 4% quarter over quarter, the Networking segment increased by 10% year over year, and the Observability segment grew by 21% quarter over quarter. Still, Cisco reduced its full-year 2024 sales outlook due to a slowdown in new orders.

Different Perceptions of Cisco's Layoffs

A CEO of a major Cisco partner, who preferred to remain anonymous, believes that the layoffs indicate Cisco's return to a sales-driven approach, focusing on high-growth areas such as security and networking with a leaner structure.

Brian Swisher, Executive VP of "Everything as a Service" at Advizex, a Fulcrum IT Partners company and a leading Cisco partner, expressed no concerns about the layoffs affecting partners. Swisher views the layoffs as Cisco's increased commitment to partners, as the company concentrates on high-growth sectors, adding, "This validates the investments that Advizex has been making in everything as a service with high growth solutions for customers, leaning into products and services from Cisco and Splunk."

A senior sales executive from a major partner, who preferred to remain anonymous, views the layoffs as Cisco reducing staff in areas where investments haven't yielded returns, mentioning that the cuts will come from stagnant areas. He believes Cisco aims to prioritize talent in AI solutions for partners, particularly in security, data center management, cloud, and networking automation. He also anticipates hiring in growing sectors like security and managed services.

A senior sales executive from another CRN SP500 company, who preferred not to be named as well, views the layoffs as a "great opportunity" for rapidly expanding partners to acquire skilled professionals, remarking it as a chance to recruit individuals with strong technical expertise or sales connections.

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