Cisco Systems Inc. is planning to cut up to 14,000 jobs in its offices worldwide, which is approximately 20% of its current workforce, as reported by CRN. It's a second major workforce cut at Cisco in the last 2 years.
Cisco's CEO Chuck Robbins has been a proponent of several organizational changes ever since he started in his role in August 2015. He believes that there is a big potential for the company to develop itself in new markets and the Cisco's earnings are "not where they should be".
Recently, Cisco (NASDAQ: Cisco Systems [CSCO]) has been working to expand its service offerings into cloud- and software-based networking, with a strong emphasis on cyber security explained by the growing interest and demand of customers in cloud-based services.
However, as cybersecurity and cloud-based software is a relatively new area for Cisco, it creates a need in different skills and expertise. According to the CRN report this can partially explain the company's decision to heavily optimize its workforce worldwide.
This is not the first time the company carries out a large round of firings: in August 2014, Cisco fired 6,000 employees.
The decision was not yet officially announced by the company's officials and Cisco's spokesperson refused to provide a comment on the report.
Time to buy stocks?
Later today Cisco will report on the quarterly earnings and, despite the news about major workforce cuts, analysts say that now is the best time to buy Cisco's stocks as they are about to grow significantly. Cisco has consistently outperform earnings predictions in the last quarters and this quarter is predicted to be no different.
The Street says that the main reason why you should consider Cisco to become part of your investment portfolio, if it is not already, is the company's development in the new directions such as cybersecurity and software-based networking that promises expansion of its already successful business.
As it was mentioned in the CRN report the company is quite serious about pursuing new initiatives in developing its networking equipment. On one of the recent events, Cisco announced the development of three new security-focused technologies that include malware blocking, threat detection and improved threat protection technology.
Likewise, Cisco has acquired several companies working on cybersecurity and cloud solutions. Another CRN report mentioned that Cisco's partners urged the company to consider acquiring a security technology firm Imperva, that would assist Cisco in entering the security areas of Distributed Denial of Service (DDoS) and firewalls. This would further strengthen Cisco's position on the market.
Cisco's attempts to develop its cyber security business is a smart response to the growing market needs of advanced data security. As Forbes reported, JPMorgan (NYSE: JPMorgan Chase & Co [JPM]) has recently doubled the budget for cybersecurity needs while the Bank of America (NYSE: Bank of America Corporation [BAC]) announced an unlimited budget for these needs. In addition to that, the U.S. government increased its cybersecurity budget to $19 billion for the next year. It can be safe to say that Cisco's new cybersecurity services will quickly find its first customers.
Don't let the news about Cisco's major workforce cut to discourage you about the company's future and consider buying its stocks before you regret it.