Cisco has launched a $600 million restructuring that includes layoffs, unloading office space and reshuffling its workforce to focus on security and enterprise networking.
Cisco reported the restructuring this week, saying it would affect about 5% of its nearly 80,000-person workforce or about 4,000 employees. However, the company expects only a temporary reduction in the size of its workforce while trying to redistribute employees to other positions and hiring for unfilled ones, a Cisco spokesperson said in an email.
"This really is a rebalancing," said Cisco CFO Scott Herren during the company's earnings call with analysts on Wednesday.
Cisco will redirect its resources toward security and enterprise networking, and accelerate its platform strategy, Cisco CEO Chuck Robbins said.
Cisco's broad security portfolio will position it to help enterprises reduce operational costs by switching from multiple vendors' products to Cisco's platform, said Will Townsend, vice president and principal analyst at Moor Insights & Strategy.
"Security represents tremendous upside for the company given their footprint in large enterprises," Townsend said.
Cisco's security products include Cisco+ Secure Connect, Cisco Umbrella, Duo, Cisco SecureX and Cisco Secure Cloud Analytics, according to Gartner analyst Frank Marsala. The Secure Cloud Analytics portfolio includes Secure Access Service Edge, extended detection response, zero trust and cloud security.
Cisco's enterprise networking products comprise its portfolio for data centers, private and public clouds, and the campus.
"It is not a surprise that Cisco wants to double down and improve its portfolio and the agility of the portfolio," IDC analyst Rohit Mehra said.
Cisco will likely increase its focus on the Catalyst and Meraki products, said Shamus McGillicuddy, an analyst at Enterprise Management Associates. "They are working hard to make all their networking products manageable via the Meraki cloud," he said.
Cisco and its customers can benefit from more cloud-delivered products, McGillicuddy said. For Cisco, these products ensure recurring revenue through their subscription-based model rather than perpetual licenses. For customers, they eliminate the installation and maintenance costs of on-premises products.
Cisco declined to specify which office spaces it would drop during the restructuring, but confirmed that the company plans to move more toward a hybrid work model.
"Cisco is well positioned to lead the hybrid work transition, and we continually evaluate our long-term workplace strategy to ensure alignment with key priorities and Cisco values," the Cisco spokesperson said. "This includes investing in collaborative hubs, upgrading offices, and in some cases, reducing leased or owned office space to reinvest in other priority areas."
Cisco expects revenue this quarter to increase by 4.5% to 6.5%. Last quarter, revenue rose by 6%, beating analyst estimates.
Helping Cisco's revenue increases was an easing of supply chain restraints that allowed the company to whittle down its order backlog, Gartner's Marsala said. The company was also able to raise prices because of inflation.
"Backlog built during the tough supply issues, prices raised, now supply chain is easing, so revenue is being recognized," Marsala said.