Cisco to Lay Off 5,500 Employees as Networking Hardware Business Sputters

In the fourth quarter, Cisco reported revenue from the router unit fell 6%, while revenue from switch unit grew by only 2%.

SAN JOSE, Calif. – Cisco Systems is cutting up to 7% of its global workforce or 5,500 jobs starting this summer. The tech giant said it was taking the “decisive” move so it could reinvest in faster-growing areas such as security and cloud computing.

Cisco, which employs about 70,000 people globally, said it will reinvest the money saved from the job cuts in “key priority areas” for the company, including developments in the Internet of Things (IoT), next generation data centers and cloud computing technology.

“Primarily, we are looking at the areas of growth that we believe will grow faster than others,” Cisco CEO Chuck Robbins said on an Aug. 17 conference call to discuss the job cuts and Cisco’s fiscal fourth-quarter results and outlook. “We are actually working at bringing innovation to our core (businesses). It’s not that we’re ignoring one (area) over the other.”

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Cisco’s traditional business of selling network switches and routers has struggled in recent years as demand from telecom carriers has fallen and competition from other suppliers has increased.

In the fourth quarter, the company reported revenue from the router unit fell 6%, while revenue from switch unit grew by only 2%. The company has focused more of its attention on its firewall business that offers computer protection software.

It has also devoted more resources in acquiring other businesses. In the last year Cisco has purchased 10 companies, many of which offer cloud-based services to connect or secure internet enabled equipment and devices.

The latest announcements follow a round of 6,000 layoffs at Cisco in 2014 and 4,000 in 2013.  It is the second tech giant this year to announce major layoffs. In April, competitor Intel announced it was cutting 12,000 jobs or 11% of its global workforce.

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