Workforce reductions can be unpleasant, but apparently the management at Cisco Systems (NASDAQ:CSCO) deems them necessary. Cisco layoffs are expected soon, but CSCO stock traders seem to be fine with this development. In addition, the company recently disclosed its quarterly financial stats, which came in largely positive.
Networking-infrastructure specialist Cisco is implementing what CFO Scott Herren politely calls a “rebalance across the board.” That “rebalance” involves employee layoffs that could impact up to 5% of the company’s workforce. According to Barron’s, Cisco had 83,300 employees at the end of July.
CEO Chuck Robbins had his own polite way of referring to the Cisco layoffs, saying the cuts were “right-sizing certain businesses.” Along with the headcount reduction, this “right-sizing” will include shutting down some office facilities that have been “unused or under-utilized.”
“We have a ton of small leased offices around the world that we don’t need anymore,” Herren explained. Thus, Cisco will have fewer buildings and people. The market should construe this as bad news, right? Not necessarily.
How Are the Cisco Layoffs Affecting CSCO Stock?
Numerous technology businesses are trimming down in order to combat the impact of “sticky” inflation. So, financial traders could actually view the Cisco layoffs and office-building shutdowns as a good thing.
This helps explain why CSCO stock is rallying 3% this morning. However, there’s other news to consider. Specifically, Cisco just reported results for its first fiscal quarter, which covers the period ending Oct. 29, 2022.
For starters, quarterly revenue of $13.6 billion indicated a 6% year-over-year (YOY) increase. This result exceeded the company’s forecast of between 2% and 4% growth. It also beat the analyst consensus estimate of $13.4 billion.
Moreover, Cisco disclosed quarterly adjusted earnings of 86 cents per share, up 5% YOY. That’s another beat for Cisco; Wall Street had forecast 84 cents per share.
In other words, investors have positive data points to react to along with the layoff and office-closure news. All in all, CSCO stock traders are feeling bullish today as Cisco reveals its “rebalancing” plans.
On the date of publication, David Moadel did not hold (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.