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Cisco Announces Workforce Reduction Amid Industry Downturn
Ticker Tea
February 15, 2024
📝 SUMMARY: Cisco Systems Inc. ($CSCO) is the latest tech giant to announce significant job cuts, with plans to reduce its global workforce by 5%, equivalent to over 4,250 positions. This decision reflects the ongoing cost-cutting measures across the tech sector, which has been grappling with the economic downturn initiated two years ago. The announcement came amidst a 9% drop in Cisco's shares during extended trading on Wednesday.
The tech industry has seen a wave of layoffs in 2024, making January the month with the highest number of job cuts since March of the previous years. Giants like Alphabet ($GOOGL), Amazon ($AMZN), Microsoft ($MSFT), SAP ($SAP), along with eBay ($EBAY), Unity ($U), and Discord, have all announced workforce reductions. According to Layoffs.fyi, the year has already witnessed nearly 35,000 layoffs across 144 tech companies.
Despite the layoffs, Cisco reported strong fiscal second-quarter results, albeit with a cautious forecast. The company achieved earnings of 87 cents per share, adjusted, surpassing the expected 84 cents, with revenue reaching $12.79 billion against a forecast of $12.71 billion. However, revenue saw a 6% year-over-year decline, and net income decreased to $2.63 billion from $2.77 billion in the previous year.
The ongoing acquisition of Splunk ($SPLK), valued at $28 billion, is expected to close late in the first calendar quarter or early in the second, as stated by CEO Chuck Robbins during an analyst call. Robbins also highlighted macroeconomic challenges and a cautious deal-making environment as factors influencing Cisco's conservative guidance for the upcoming quarters.
Cisco's guidance for the fiscal third quarter includes adjusted earnings per share of 84 to 86 cents on revenue between $12.1 billion and $12.3 billion, with full-year expectations adjusted to $3.68 to $3.74 per share and $51.5 to $52.5 billion in revenue. The adjustments reflect the cautious stance amid uncertain market conditions and slower customer deployments.
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