Cisco (NASDAQ:CSCO) is among the large-cap tech stocks that investors may not necessarily pay as close attention to as, say, others in the so-called “Magnificent Seven.” However, the company is seeing significant attention today, with the latest round of Cisco layoffs reportedly set to be carried out soon.
This latest round of layoffs will affect at least 4,000 employees. The company is expected to make the official announcement in its upcoming quarterly earnings report, which is due tomorrow.
With many tech companies announcing staff cuts and a focus on efficiency, investors find these headlines easier to understand. Today, CSCO stock is up a little under 1% in early afternoon trading. This suggests investors are broadly looking at this move as a net positive for the company.
Let’s dive into what to make of this news today, and what it may mean for Cisco shareholders.
Cisco Layoffs to Affect Over 4,000 Employees
Efficiency is everything these days, and tech companies everywhere that arguably got bloated during the post-pandemic hiring spree are clearly pulling back.
That said, Cisco’s latest round of job cuts is rather large. With 4,000 or more employees likely to be affected, it’s unclear what the cost to the company (and investors) will be. It’s estimated that the company’s last round of cuts cost around $800 million in severance and termination benefits. So it’s likely we’ll see another bill passed onto investors with this round of cuts.
The question is whether the company will end up being well-positioned to maintain its growth trajectory with this lower headcount or if the company will end up hiring back many of the employees it laid off. Time will tell. However, given Cisco’s current employee count of around 85,000, this cut will amount to less than 5% of its overall workforce. That’s still significant, but maybe not as big a deal as many may initially think.
I think that’s why CSCO stock is up today on this news. We’ll have to see how earnings come in tomorrow and if these cuts may foretell some weakness in the upcoming numbers. For that reason alone, I’d take a cautious approach to Cisco heading into this report.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
