Cisco, a maker of routers, switches and data-center gear whose sales are jeopardized by the movement to cloud computing and by fierce competition, is laying off up to 5,500 positions, or 7 percent of its workforce, starting immediately. Rumors earlier in the day had put the figure at 14,000.
The San Jose, Calif. company reported a 2 percent decline in revenue for its fourth FY2016 quarter ended June 30, to $12.6 billion, and quarterly net income of $2.8 billion, up 21 percent year over year. Revenue for the current quarter (1QFY2017) is expected to increase or decrease by 1 percent year-over-year.
The layoffs will let Cisco “optimize 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,” the company said in a statement. It plans to reinvest “substantially all” of the layoffs’ cost savings into those areas. Software and subscription services have become a new focus for Cisco, and “we will transition more of our revenues to a software and subscription-based model,” CEO Chuck Robbins said during a conference call following the release of earnings.
Cisco’s data-center revenue for last quarter was down 1 percent, and its routing revenue was down 6 percent. The security segment was up 16 percent.