SAN FRANCISCO (AP) — Cisco Systems is laying off 5,500 employees as the Internet gear maker scrambles to adapt to a technology upheaval that has triggered similar cutbacks to other storied tech companies.
The shake-up announced Wednesday means about 7 percent of Cisco’s roughly 74,000 workers will lose their jobs beginning this summer.
The purge is the latest fallout from a relentless march of innovation that has forced some of the world’s biggest and oldest technology companies to head in new directions in search of revenue growth.
“Companies are retooling now in attempt to take advantage of this next generation of opportunities,” says Patrick Moorhead of tech consulting firm Moors Insights & Strategy. “History shows that some make the transition and others don’t make it.”
In the case of the 32-year-old Cisco, its business has been hurt as more of its corporate customers rely on remote data centers for their computing needs instead of online networks maintained on their own premises.
The San Jose, California, company is now focusing more on equipment tailored for large data centers and pouring more resources into software and security. The new emphasis is being orchestrated by CEO Chuck Robbins, who replaced the Cisco’s long-time leader, John Chambers, nearly 13 months ago.
“We are committed to making the necessary decisions to drive our future growth,” Robbins assured analysts during a Wednesday conference call. He promised to use the money that Cisco saves from paring its workforce to invest in areas where it believes it can boost its sales in the future.
Cisco’s fiscal fourth-quarter results, also released Wednesday, underscored the need to expand beyond the company’s traditional strengths.
The company’s revenue for the three-month period that ended July 30 increased by just 2 percent from last year to $12.6 billion. Previous cost cutting helped boost Cisco’s profit 21 percent to $2.8 billion, or 56 cents per share.
The performance didn’t impress investors as Cisco’s stock shed 42 cents to $30.30 in extended trading after the numbers came out. The decline may have been driven by disappointment that Cisco’s job cuts weren’t nearly as deep as published reports had speculated they would be.
Cisco will also be using money from the job cuts to focus on its efforts in the Internet of Things, which has been reported in the past in tED magazine and tEDmag.com. Included in that effort is the launch into lighting, where Cisco has partnered with Phillips, Osram, and GE to move them away from selling incandescent bulbs and toward using connected devices in their products to garner feedback on usage, make them usable remotely, and provide energy-saving resources. Cisco has also partnered with Phillips to create Power over Ethernet, which allows Cat 5 cable to be used to control and monitor lighting.
It wouldn’t be a shock if Cisco jettisoned even more workers in during the next year or two, given what has happened at other big tech companies that have gone through several waves of layoffs. Cisco itself previously laid off 6,000 workers in 2014 after letting go of 4,000 employees in 2013.
The employees who have been losing their jobs throughout technology have been highly successful in finding other positions in the industry, as long as they have training in technical fields, said Todd Thibodeaux, CEO of CompTIA, a trade group that tracks industry employment. Laid-off workers in the finance, administrative and marketing departments of tech companies tend to have more trouble.
“This is certainly a period of transition, not only for the companies involved in it, but also for some of their workforce as well,” Thibodeaux said.
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