Cisco Systems (CSCO.O) revealed plans to reduce its global workforce by 5%, amounting to over 4,000 job cuts, and lowered its annual revenue forecast amidst challenges in the tech industry. The networking equipment giant cited a tough economic environment and weak demand from telco and cable service provider customers as factors contributing to the decision.
In response to the challenging economic landscape, Cisco Systems (CSCO.O) has announced significant measures to adapt to market conditions. The company revealed its intention to reduce its global workforce by 5%, resulting in over 4,000 job cuts. This strategic move comes as Cisco grapples with a tough economy that has witnessed thousands of layoffs across the tech sector this year.
The decision to trim its workforce accompanies a downward revision of Cisco's annual revenue target. The company lowered its revenue forecast to a range of $51.5 billion to $52.5 billion, down from the previously projected range of $53.8 billion to $55 billion. This adjustment prompted a notable decline in Cisco's stock, with shares falling more than 5% in extended trading following the announcement.
CEO Charles Robbins highlighted the challenges facing the company, citing weak demand from telco and cable service provider customers. Analysts anticipate continued pressure on demand for Cisco's products as telecom industry clients prioritize reducing excess inventory of networking gear over new investments.
While grappling with near-term challenges, Cisco is also positioning itself for future growth opportunities. The company is focusing on artificial intelligence initiatives and has formed a strategic partnership with Nvidia (NVDA.O) to enhance its capabilities in data centers and AI applications. This collaboration underscores Cisco's commitment to innovation and its efforts to remain competitive in a rapidly evolving tech landscape.
Looking ahead, Cisco expects third-quarter revenue to range between $12.1 billion and $12.3 billion, falling short of analysts' estimates. The company acknowledges the need for restructuring and cost-cutting measures to realign its operations with high-growth areas. These initiatives include a one-time charge of $800 million related to severance and restructuring costs, with the majority of charges expected to be recognized in the first half of fiscal 2025.
In the second quarter, Cisco reported adjusted earnings of 87 cents per share and revenue of $12.79 billion, surpassing analysts' expectations. Despite the positive performance, the company remains focused on implementing strategic changes to navigate the evolving market dynamics and position itself for long-term success.
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