A recent announcement of layoffs at Dell and Cisco is attributed to both losing significant market share to competitors like Arista Networks in the sphere of networking for Cisco, and less expensive PC brands such as Acer for Dell, according to an industry analyst.
Info-Tech Research Group’s advisory practice lead, Scott Bickley, was commenting on the substantial layoff news from these tech giants. The most recent update came Friday when Reuters reported that inside sources indicated Cisco might announce job cuts by Wednesday, coinciding with its fourth-quarter results.
As noted by Reuters, the layoff count could equal or exceed the 4,000 positions eliminated by Cisco in February.
Reuters also mentioned that Cisco has been facing issues with weak demand and supply-chain challenges in its primary operations, prompting the company to expand into new areas, highlighted by its acquisition of cybersecurity company Splunk for $28 billion.
Meanwhile, on Tuesday, a Bloomberg report indicated that Dell is reportedly laying off thousands of staffers from its sales team, “part of the hardware vendor’s reorganization efforts targeted at increasing its revenues from AI-related sales by putting in a new sales unit focused on AI products.”
Info-Tech’s Bickley stated in an email that “combined with tepid customer demand, [both organizations] need to streamline operations to maintain profit margins. They are hiding behind the illusion of investing in AI and cybersecurity, which is partially true but likely not the primary reason for the cuts. Cisco is a second-rate player in the cybersecurity space at best, and they already have an AI plan in place to support hyperscaler infrastructure, so why the cuts now?”
Cisco’s last earnings report in April, he said, “showed a major decline in revenues and net income, which is a disturbing trend for them of late. I view these cuts as an ill-fated attempt to cut their way to profitability. Cisco also reports earnings on August 14. They may be trying to get ahead of another poor-performing quarter and throwing all the bad news into the ‘kitchen sink.’”
Bickley added, “The recent Splunk acquisition likely plays a part in the RIF [reduction in force] as they seek to integrate this company. There is likely an overlap in management talent and sales teams which would need to be rationalized. There will also be a material expense in integrating Splunk into the Cisco core products, which needs to be funded.”
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