Sources: Layoffs Coming At Cisco

Cisco Systems is laying off thousands of employees as it moves to drive software growth in new areas like security and internet of things, according to multiple sources close to the company.

San Jose, Calif.-based Cisco is expected to announce the cuts within the next few weeks, as many early retirement package plans have already been offered to employees, said sources. Cisco is set to announce its fourth fiscal quarter results after the market closes tomorrow.

The cuts stem from Cisco’s transition from its hardware roots into a software-centric organization.

Editor's note: This story was updated after Cisco Wednesday disclosed plans to lay off up to 5,500 employees in a restructuring plan that it will implement this quarter.

Sponsored post

[Related: Cisco Earnings Preview: Microsoft Integration, Security Growth And Switching Revenue Decline]

"They need different skill sets for the software-defined future than they used to have," said one source familiar with the situation, who declined to be identified. "In theory the addressable market could be higher and margins richer, but it will take some time to make this transition."

Cisco declined to comment.

The company's headcount as of April 20, 2016, was 73,104, according to a filing with the U.S. Securities and Exchange Commission.

Wall Street analyst Trip Chowdhry of Global Equities Research predicted in a January report that Cisco would cut 14,000 employees in 2016. Chowdhry said the cuts would be due to the company not needing as many employees in the back-end process as more customers transition to the cloud as well as Cisco being late to enter the cloud market.

The networking leader has a history of announcing layoffs at the end of its fiscal year each summer. In August 2014, Cisco revealed plans to cut 6,000 jobs, roughly 8 percent of its total workforce at the time. In August 2013, the company cut 4,000 employees, about 5 percent of its global workforce at the time. Cisco also cut 1,300 positions in July 2012. One of Cisco’s largest layoffs came in July 2011, when the company cut 6,500 employees, representing about 9 percent its global workforce. Cisco had no layoffs in the summer of 2015, coinciding with Chuck Robbins' ascension to CEO that July.

Cisco’s stock has increased more than 15 percent over the past three months and hit a nine-year high on this week at $31.23 per share.