It was earlier reported that Cisco (NASDAQ:CSCO) may plan to lay off roughly 20% of its workforce, or approximately 14,000 employees, as it looks to slash its costs by 15%. According to the company though, it will slash “just” 5,500 jobs, as it looks to shift away from hardware and put more of an emphasis on software. Competitive pressure is likely helping with the decision too, as Arista Networks (NYSE:ANET) continues to build momentum.
Cisco’s move isn’t unfamiliar in the old-line tech world. In fact, others like Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC) have made similar maneuvers. Moving resources away from their bread-and-butter businesses, the two tech companies have found a groove in higher margins businesses that have helped pushed the stock prices higher over the past few years.
Will it be the same for Cisco? Only time will tell. But given that the tech world is/has been gearing up for continued strength in connectivity, Internet of Things and improved connections, one would think Cisco will play some sort of role in the revolution.
In either regard – whether Cisco partakes in the changes or not – one can only assume that it will not happen quickly. These types of situations tend to take time and unfortunately, they’re not uncommon in the sector. That’s somewhat surprising, given that companies like Cisco usually have plenty of cash and little reason to not be on the forefront of new technologies.
In any regard, while the stock is down on the news, it did just hit a new 52-week high earlier this week. A move to higher margin products shouldn’t be too frowned upon either.
Investors should get more insight given that the company reported earnings on Wednesday after the close. For what it’s worth, Cisco topped earnings per share and revenue expectations.
Source Seeking Alpha, Written by Bret Kenwell
