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Cisco (NASDAQ:CSCO) is one of those large-cap technology stocks that investors don’t necessarily pay as much attention to as other stocks in the so-called “Magnificent Seven,” for example. Nevertheless, the company is in the spotlight today as Cisco’s latest wave of layoffs is reportedly imminent.
This latest wave of layoffs will affect at least 4,000 employees, and the company is expected to make an official announcement in its next quarterly report, due out tomorrow.
With many technology companies announcing staff cuts and a focus on efficiency, these headlines are easier for investors to understand. Today, CSCO stock is up just under 1% in early afternoon trading, suggesting that investors are broadly viewing this move as a positive for the company.
Let’s take a look at what today’s news means for us and what it could mean for Cisco shareholders.
Layoffs at Cisco affect over 4,000 employees
Efficiency is everything these days, and technology companies everywhere that were arguably bloated during the post-pandemic hiring wave are clearly pulling back.
However, Cisco’s latest wave of layoffs is quite large. With 4,000 or more employees likely to be affected, it’s unclear how much the cost to the company (and investors) will be. Estimates suggest the company’s last wave of layoffs cost around $800 million in severance and compensation, so it’s likely we’ll get another bill for investors with this wave of layoffs.
The question is whether the company will end up well positioned to maintain its growth trajectory with this smaller headcount, or whether it will end up rehiring many of the laid-off employees. Time will tell. However, given Cisco’s current headcount of around 85,000, this reduction will represent less than 5% of the total workforce. That’s still significant, but perhaps not as bad as many initially think.
I think that’s why CSCO stock is rising today on this news. We’ll have to wait and see what earnings come out tomorrow and whether these cuts signal weakness in the upcoming numbers. For that reason alone, I’d be cautious on Cisco ahead of this report.
As of the publication date, Chris MacDonald had no position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s disclosure policies.
At the time of publication, the editor in charge did not hold any positions (either directly or indirectly) in the securities mentioned in this article.
