It's not a bombshell. But it's still a sign of the times for a big IT companies making the shift from hardware to cloud services and recurring revenues. Indeed, Cisco Systems is cutting roughly 310 employees from its headquarters in San Jose, Calif., Bloomberg reported Tuesday evening.
Cisco confirmed the cuts roughly one week after Chairman John Chambers affirmed plans to step down from the company's board in December 2017. CEO Chuck Robbins will take on the chairman role thereafter, while continuing to reshape the networking company in his image.
That image: More software, subscription services and recurring revenues -- particularly on the security and IT management fronts. The latest example involves Cisco Intersight, a SaaS-based management and automation platform for Cisco Unified Computing System (UCS) and HyperFlex Systems. The platform, set for launch later this year, apparently will have multi-tenant capabilities for MSPs to remotely manage customer infrastructure. "Yes, that's the long-term plan," a spokesman told ChannelE2E this week.
Also this week, Cisco completed the Springpath acquisition -- pushing the company deeper into the hyperconverged infrastructure (HCI) sector vs. Nutanix, HPE SimpliVity and Dell EMC.
Cisco Recurring Revenue Growth
Cisco's recurring revenues are rising -- though perhaps not as swiftly as some critics would like. During the company's most recent quarter, 31 percent of total revenue was recurring and revenue from subscriptions represented 51 percent of software revenue, Robbins said on an earnings call.
"Going forward, you should expect to see our software business benefit from the transition of our campus networking portfolio to a subscription model," he added at the time.
Still, the company's traditional hardware sales remain under pressure. Amid that reality, Cisco announced plans for 1,100 layoffs in May 2017 -- in addition to 5,500 cuts in 2016. The latest cuts, 310 positions at headquarters, apparently are over and above those earlier layoffs.
IT Giants Cutting Jobs
Cisco's rebalancing act isn't unique. Crosstown rival HP Enterprise apparently is cutting 5,000 of its own positions. Fellow IT giants IBM and Oracle also have had multiple rounds of layoffs over the past year (see the scorecard here), but those companies generally don't disclose exact cuts. In many cases, they decline comment about alleged cuts -- refusing to acknowledge if they even occurred.
“Cisco regularly evaluates its business and will always make the changes necessary to effectively manage our portfolio and drive the most value for our customers and shareholders. As a result, this can mean realigning some areas so that we can invest in others such as security, data center/cloud and networking.”
Robbins has tightly managed Cisco since taking over as CEO roughly two years ago. As CNBC noted in August 2017: "Revenue has now declined on an annualized basis for seven consecutive quarters. Still, Cisco has beaten earnings and sales estimates for every quarter since CEO Chuck Robbins took over for John Chambers two years ago."
What's next on Robbin's game plan? The answers will likely surface right after Halloween at Cisco Partner Summit 2017.
