It hasn?t been a good year for giant network equipment maker Cisco as they plan to lay off more than 14,000 of their employees. The announcement is expected to happen as soon as Cisco releases its fourth quarter financial report. It?s not a small layoff as the 14,000 employees compose at least 20 percent of the company?s workforce.
The San Jose-based company cites the low spending of telecom carriers and companies on network switches and routers as the main reason why they have to make the cut. Some of the key features in the network carrier expenditures include the significant change in the use of routers and other hardware switches. Now Cisco is looking for ways they can capitalize on slowly adapting their business to wireless security and datacenters.
According to analysts, the cut is needed for Cisco so they can smoothly transition from hardware to the current trend of wireless networking, Reuters reports. A Jefferies analyst noted, ?We think it’s true. As we’ve met with investors in recent weeks, we’ve picked up on concerns that Cisco may be looking to reduce headcount in the not-too-distant future.?
If it?s indeed true, Cisco will be the second giant company to make the drastic move of laying off a massive number of employees. In April, Intel Corp. announced that they were going to lay off at least 12,000 employees or at least 11 percent of their workforce. Needham & Co analyst Alex Henderson, however, believes that this layoff by Cisco may not be the end of the trend.
On Wednesday, Cisco?s share plummeted to 1.4 percent at $30.71 in Nasdaq. On Tuesday?s closing, Cisco?s stock rose to 15 percent compared to last year?s 10.5 percent increase in the Dow Jones U.S. Technology Hardware & Equipment index.
Patrick Moorhead of Moor Insights & Strategies believe that these new transitions especially by the tech industry has been the result of the technological advancement of current tech generations. For companies that have supplied some of the most basic hardware tools for network carriers, the next best thing to do is adapt.