Cisco laying off 5,500 employees amid tech upheaval

Michael Liedtke US multi-national company Cisco Systems is laying off 5,500 employees as the internet gear maker scrambles to adapt to a technology upheaval that has triggered similar cutbacks in other legendary tech companies.

The shake-up, announced on Wednesday, means about seven per cent of Cisco’s approximately 74,000 workers will lose their jobs.

The purge is the latest fallout from a relentless march of innovation that has forced some of the world’s biggest and oldest technology companies to head in new directions in search of revenue growth.

Others that have been laying off thousands of workers while overhauling their product lines include Microsoft – the world’s largest software maker; Intel – the world’s largest maker of computer chips and HP, a Silicon Valley pioneer that went to the extreme of splitting itself into two separate companies that have continued to cut back.

For decades, tech companies have been prodded into sometimes painful transitions as advances in computing and faster wireless connectivity open up fertile new markets for frequently nimbler and more motivated rivals to plough new ground while the incumbent powerhouses stick to familiar ground.

The adjustments are usually more wrenching for the companies that wait too long to pivot.

IBM, for instance, dawdled during the early phases of the move away from mainframe computers, resulting in a traumatic overhaul that began in the 1990s and continues to this day. Despite its early leadership in personal computers, Apple went bankrupt during the 1990s before rebounding with its invention of the iPod and then, more importantly, the iPhone that triggered the mobile computing revolution underlying many of the current changes in technology.

“Companies are retooling now in an attempt to take advantage of this next generation of opportunities,” says Patrick Moorhead of tech consulting firm Moors Insights & Strategy. “History shows that some make the transition and others don’t.”

In the case of the 32-year-old Cisco, its business has been hurt as more of its corporate customers rely on remote data centres for their computing needs instead of online networks maintained on their own premises.

The San Jose, California, company is now focusing more on equipment tailored for large data centres and is pouring more resources into software and security. The new emphasis is being orchestrated by CEO Chuck Robbins, who replaced Cisco’s longtime leader, John Chambers, nearly 13 months ago.

“We are committed to making the necessary decisions to drive our future growth,” Robbins assured analysts during a Wednesday conference call. He promised to use the money that Cisco saves from paring its workforce to invest in areas where it believes it can boost its sales in the future.