Cisco plans to reduce its workforce significantly to prioritize high-growth sectors.

Cisco, the prominent network giant headquartered in San Jose, California, is undergoing a strategic business restructuring that may result in the termination of thousands of employees, according to information from three individuals familiar with the situation.

As of fiscal 2023, Cisco boasts a workforce of 84,900 employees, as indicated on its official website. Although the exact number of employees to be affected by the impending layoffs is yet to be finalized, one source mentioned that the company is deliberating on the scale of the reductions. An official announcement regarding this restructuring could be made as early as next week, coinciding with the scheduled earnings call on February 14th.

This potential move follows a previous restructuring effort announced by Cisco during an earnings call in November 2022, which saw approximately 5% of its workforce impacted. This earlier restructuring incurred expenses of around $600 million related to severance and other charges. When approached for comment, Cisco declined to provide any official statement.

The decision to downsize its workforce aligns with a broader trend within the technology sector, where companies like Nokia and Ericsson have also undertaken significant layoffs in recent times to mitigate costs. Likewise, prominent tech firms such as Amazon, Alphabet, and Microsoft have implemented similar measures in recent weeks.

Cisco's move comes amid challenges in its networking equipment segment, with the company having lowered its full-year revenue and profit forecasts during its previous earnings call. This slowdown was attributed to decreased demand in the first quarter, as customers focused on deploying and integrating products within their environments.

Furthermore, Cisco has encountered hurdles related to supply chain disruptions and a post-pandemic slowdown in demand, prompting a strategic shift towards software offerings like cybersecurity in recent years.

In summary, Cisco's restructuring initiative reflects its efforts to adapt to evolving market dynamics and streamline operations to remain competitive in the technology landscape.