Cisco just announced its plan to cut 5,500 jobs, or 7% of the total workforce.
That’s much smaller than the 14,000 job cuts some reports suggested on Tuesday, but still one of the largest in Cisco’s company history.
Cisco’s CEO Chuck Robbins said in an earnings call with investors on Wednesday that the layoffs will essentially help the company move away from “slow growth” areas and reinvest in “key priorities,” as it continues to shift its business from legacy hardware to software and the cloud:
“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.
“Today we announced a restructuring, enabling us to optimise 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. We expect to reinvest substantially all of the cost savings from these actions back to the businesses and we’ll continue to aggressively invest to focus on our areas of future growth.”
In other words, Robbins wants to shift Cisco’s priority from its legacy switching and routing businesses to its high-growth cloud security and wireless businesses.
That’s a big task given switching and routing still comprised nearly half of Cisco’s revenue last year. And although security and collaboration businesses saw the fastest growth rates, each up 13% and 9% year-over-year respectively, they only accounted for about 13% of total revenue.
Robbins was also cautious with the perception that Cisco might be abandoning investments in its core legacy business entirely, adding it’s a “relative” statement.
“It’s more of a relative statement than it is an absolute statement. At the same time, we actually are working very diligently on bringing innovation to our core…So it’s not that we’re ignoring one in favour of another, we just want to make sure our investments are commensurate with our growth opportunity from a relative perspective,” he said.
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