Cisco Systems, Inc. announced August 17 that it will slash 5,500 jobs. The cuts are consistent with Silicon Valley tech terminations running almost double the pace of 2015.
Several Breitbart News sources believe that San Jose-based Cisco had planned almost three times the jobs reduction, but may have become gun-shy in an election year where Republican Donald Trump is threatening to hammer big companies that outsource huge numbers of jobs.
Silicon Valley tech firms have been hemorrhaging jobs in 2016, according to global outplacement consultancy Challenger, Gray & Christmas, Inc., which tracks employment terminations at large organizations. Through the month of July 2016, major Silicon Valley tech firms terminated 62,917 positions — up 71 percent over the 36,881 through July 2015.
John A. Challenger, Chief Executive Officer of Challenger, Gray commented:
“We have seen a number of large-scale layoffs from technology firms going back to 2015. While the sector remains an area of solid growth, it appears that large firms are coming to terms with major shifts in business trends. In Cisco’s case, it is shift away from its traditional focus on hardware toward services like wireless security and data management.”
Wall Street analysts had been expecting a very “bold restructuring” of up to 14,000 job cuts out of Cisco’s 78,000 employees. Several brokerage firms reduced long-term Cisco estimates and downgraded the stock, sending the shares down by over 3 percent.
According to an analyst call hosted by Cisco, the company’s truncated restructuring plan will still allow it to reinvest all the cost savings from shrinking its labor intensive networking hardware sector. New investments will focus on expanding services such as security, connected devices, data-center products, and cloud storage — all of which allow significant staff outsourcing to Southern Asia.
The expected 14,000 Cisco job cuts that would have amounted to about a 17 percent reduction in the company’s work force, would have been the second-largest Silicon Valley tech layoff since CEO Meg Whitman of Hewlett-Packard (HPQ: NYSE) announced that the once-iconic company would “downsize” another 30,000 jobs in January 2015. The Cisco 2016 job cuts would have been larger than Dell’s 10,000 planned job cuts announced in January, and Intel’s 12,000 jobs whacked in April.
For the fourth quarter ending July 30, Cisco’s announced net income rose to $2.81 billion, or 56 cents a share, from $2.32 billion, or 45 cents, a year earlier. Sales fell 2 percent to $12.6 billion. Excluding some costs, profit was 63 cents, compared with an average Wall Street estimate for profit of 60 cents on revenue of $12.6 billion.
In a prepared statement, Cisco also guided analysts that with the restructure beginning immediately, “profit before certain costs for the first quarter ending in October will be 58 cents to 60 cents and revenues will be little changed from a year earlier.”
The earning and forecast were in line with Wall Street projections, but the abandonment of a huge restructure was seen as reducing earnings momentum in the future.
Challenger commented on the withering tech employment prospects in Silicon Valley:
“Companies that do not adapt to changing trends will be left behind. Nobody knows this better than technology firms, where the very nature of the business means constantly evolving and shifting resources. We are seeing this play out with Cisco, just as it has played out with Intel, Microsoft, Hewlett-Packard, Dell, and several other tech giants in recent months.”