The most recent tech company to execute mass layoffs was Cisco. These layoffs were expected, but nobody could predict which employees would be impacted.
These IT layoffs, while significant for the sector, are not typical of the overall job market. Instead, they’re a sign of the peculiar conditions of our modern economy. Things in this market sector might worsen unless some of those conditions alter.
Through the early years of the internet, Cisco flourished. In 2002, it was named the most valuable firm in the world. The US technology corporation Cisco is best known for its networking devices. Its name is an acronym for San Francisco, and it has its headquarters in California. It creates, produces, and distributes networking hardware, telecom equipment, and other IT services and goods.
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Overview of Cisco
Sandy Lerner and Leonard Bosack launched the business in 1984. They proposed employing a multiprotocol router system and a local area network (LAN) to connect computers across great distances.
As a result, Cisco was well-positioned to enjoy the growth of the World Wide Web in the 1990s. It surpasses many rivals that failed during the dot-com bubble.
The market capitalization of Cisco at the time of its NASDAQ IPO in 1990 was $224 million. By 2000, Cisco had amassed a market capitalization of more than $500 billion. Thus making it the most valuable corporation in the entire world.
The business employed 83,300 people worldwide as of July 2022. Nevertheless, it has prepared to restructure and fire up to 5% of its workforce.
In the fourth quarter of the 2022 fiscal year, Cisco recorded $51.6 billion in annual revenue. In the first two months of 2022, this company’s share price ranged between $46 and $50.
Chuck Robbins, who took over the organization from former CEO John Chambers in 2015, is the current CEO. The business still employs Chambers as executive chairman. Cisco has made many significant acquisitions under Robbins. They are in industries like cyber security, teamwork, and the Internet of Things.
Cisco’s activities
There are a multitude of goods and services offered by Cisco, including:
- Networking: Cisco offers switches, routers, and software at the individual, small business, and industrial scales. This is to enable businesses to construct computer networks.
- Wireless and Mobility: The business develops access points, wireless controllers, and network management solutions. It is mainly for wireless communications.
- Security: The network security products include DDoS protection, firewalls, and multi-factor authentication.
- Collaboration: The business supports business and collaboration among staff members. It is done primarily through home-based work and remote management.
- Data Centres: Cisco assists clients with setting up networks. It is for cloud computing and managing their infrastructure.
Cisco lays off 4,100 employees
At Cisco, expected layoffs started in December 2022. The firm started laying the framework for the layoffs the month before. It was stated that about 4,100 staff would lose their jobs. This is 5% of the total workforce of the business.
Although those employees have a right to be alarmed, Cisco has taken steps to limit the effects. While these layoffs occur, the company is restructuring and actively hiring new employees. According to Cisco, the company is doing everything it can to keep staff on board by relocating them from closing departments to new, available roles. Cisco expects to have the same number of employees at the end of the year as it did at the beginning.
Cisco has stated that it will offer “generous severance packages” for all employees who lose their jobs. Cisco used the reasons for restructuring to justify a series of layoffs in 2021, even as it hired heavily in other areas.
Financials for Cisco
The layoffs were announced just before the company’s Q1 2023 earnings call. The tech giant received some numbers from the call that were better than anyone had anticipated. The total sales increased by 6% from the prior year to $13.6 billion. Net income, meanwhile, fell 10% to $2.7 billion.
Cisco posted figures showing revenue by product. But it has yet to be particularly open about which departments may be facing job losses due to these layoffs.
The yearly growth rates for each product are as follows:
- Agile Networks: Up 12%
- End-to-End Security: Up 9%
- Optimized Application Experiences: Up 7%
- Services: No change
- Internet for the Future: Down 5%
- Collaboration: Down 2%
- Other Products: Down 47%
Cisco’s stock has experienced significant declines during 2022, much like the rest of the IT industry. On January 3, 2022, it began the year at $62.90; on October 13, 2022, it reached its lowest point of $38.60. As of December 16, 2022, the stock price was $47.81.
Why do Layoffs happen at Cisco?
The layoffs at Cisco occur when other internet behemoths have already made several staff reductions. This includes Amazon, Meta, Twitter, and others.
The mass layoff season is underway, and networking giant Cisco is reportedly beginning its layoffs. In this most recent round of IT layoffs, Cisco has reportedly affected up to 4,000 employees in a rebalancing move.
According to a report, Cisco has begun making cuts after news broke that the business would soon eliminate some positions. As mentioned earlier, it is anticipated that this will impact over 5% of the Cisco workforce in a “rebalancing move.”
To “rightsize certain businesses,” the corporation is reportedly cutting many jobs at Cisco. IANS report, a corporate employee posted on Blind that they were “affected by Cisco layoffs!”
According to the report, the impacted Cisco employee stated, “Looking for immediate (software engineering) recommendations. Any help would be greatly appreciated. Thanks.”
The IANS report also states that Cisco did not directly address the company’s layoffs, stating in a statement: “We did not take this choice casually, and we will offer those affected extensive support.”
According to a previous article by the Silicon Valley Business Journal, “Chairman and CEO of Cisco, Chuck Robbins, did not give any detail on laying off staff. He stated that he would be willing to get into a lot of detail here once we could talk to them. What we’re doing is rightsizing some businesses.
The layoffs at Cisco occur when other internet behemoths have already made several staff reductions. At that time, other industries, including the media, consumer goods, and others, also saw layoffs during that season.
Layoffs in 2023
Many people experienced hardship in the latter six months of 2022. It was a result of the widespread layoffs that leading tech corporations announced. Yet, given that some businesses continue to have plans to lay off hundreds of employees, job losses will last for a few more months. Amazon recently disclosed its plans to reduce its headcount by 18,000 employees through layoffs. It was revealed that Cisco had fired almost 700 workers in 2023.
Layoffs have taken place in many areas. This includes software and hardware engineering, program management, product design, marketing, and more. According to reports, the firm has asked about 371 employees with offices in San Jose, California, to leave.
Two Cisco vice presidents were among the 371 employees at corporate headquarters who were affected. This is according to the study. The stated source further claimed that 222 engineers and technical staff members had been let off in the nearby city of Milpitas. In addition, the business’s San Francisco office’s 80 employees have also been instructed to vacate.
According to reports, a significant move has been taken due to the economic slump, and the business intends to cut costs. But the company hasn’t publicly stated the cause.
The impacted Cisco employees received notice of the layoffs on December 12. The notice stated that they might choose a termination date of either February 1, 2023 or March 13, 2023.
According to Cisco’s notice, the termination shall take effect either on the specified dates or 13 days after. “This action is anticipated to be long-lasting in character.”
In San Jose, Calif., Cisco made no further comments Regarding its most recent announcements of layoffs planned for this year.
Robbins declared that he would “resist going into much information here until we can talk to them. What we’re doing, in my opinion, is saying, “You can imagine that we’re going to—we’re not actually—there’s not anything that’s a lower priority, but we’re rightsizing some businesses.”
“None of the impacted employees are union members, and none of them have any valid bumping rights.” Saidah Grayson Dill, a Cisco deputy general counsel, made the statement. He made this claim in the most recent WARN letters to the Employment Development Department of California. Following the announcement of job cuts at the beginning of 2023 by several other Bay Area IT behemoths, Cisco will be laying off workers.
Thus, layoffs are being implemented in response to the “rebalancing” act and to “rightsize certain businesses.”
Conclusion
Thousands of workers are going through a difficult period, but putting these layoffs in their proper context is crucial. There are around 153.5 million jobs in the American economy. An estimated 2% of these are tech employees.
Despite the significant number of layoffs we’ve seen over the past several months, they pale compared to the state of the economy as a whole. Additionally, the tech industry operates differently from other market segments. Its financial success and failure are closely correlated with the state of the stock market.
The United States trade relations with China also adversely affected the tech sector in 2022. Regarding labor, the broader economy is going through different patterns. For every unemployed American, there are 1.7 open positions. Despite a 50-year low in unemployment, businesses are still having trouble filling open positions.
Also, if inflation worsens, the tech sector will suffer even more. This is particularly true if the Fed keeps raising interest rates. When interest rates are high, the value of the dollar usually increases. The scary news is coming out of the technology industry. But it doesn’t accurately represent the job market as a whole.