Cisco is pushing a new corporate restructuring initiative that will see long-time networking chief Jonathan Davidson exit, his former division merged into the vendor’s security and collaboration teams, and the elimination of around 7% of the vendor’s workforce.

The latest restructure was announced as part of Cisco’s latest earnings release. During the accompanying earnings call, CEO Chuck Robbins highlighted Cisco’s progress in integrating its $28 billion Splunk acquisition, its progress in developing a more robust artificial intelligence (AI) strategy, and continued growth of its cloud platforms.

Robbins also noted that those three operating segments will underpin Cisco’s focus moving forward.

“Looking ahead, we remain laser focused on growth and consistent execution as we invest to win in AI, cloud, and cybersecurity,” Robbins said. “To focus on these key priority areas, today we announced a restructuring plan to allow us to both invest in key growth opportunities as well as drive more efficiency in our business.”

That restructuring will involve the networking integration, with Davidson leaving the company and Jeetu Patel tasked with leading the new organization as chief product officer.

Davidson has spent nearly 21 years at Cisco, punctuated by a 7-year stint at rival Juniper Networks.

Patel joined Cisco in mid-2020, when he was placed in charge of the vendor’s newly created Security and Applications business group. Patel had previously held executive positions at Box and EMC.

Along with Davidson’s exit, Cisco is cutting approximately 7% of its workforce. CFO Scott Herren said the vendor will take a $1 billion charge tied to the cuts.

Herren attempted to add color to the job cuts by stating that the “reduction” is “much more of a reallocation versus a headcount savings.”

“In some cases, the efficiencies that we're going to get will be from by moving into lower cost locations,” Herren said.

The latest job cuts come just a few months after Cisco announced plans to slash 5% of its workforce following its mid-year fiscal results.

The shoots of Cisco’s latest restructuring were apparent at the recent Cisco Live 2024 event, which lacked insight into the vendor’s networking business. The vendor has instead focused most of its talking points on cybersecurity, cloud, and AI.

Cisco’s moves gain analyst approvals Analysts for the most part were positive on Cisco’s latest move.

Mauricio Sanchez, senior director of enterprise security and networking at Dell’Oro Group, thinks the consolidated focus is a good move for Cisco, and hopefully just the start.

“It always struck me that security business group was at odds with the networking business group,” Sanchez said. “When it came to the intersection between networking and security, there was overlap, there was replication, there was product positioning that was getting messy because you had Catalyst on one side and you had the firewall and Meraki on the other. It was starting to get confusing to me. Hopefully that will start leading to some greater amount of product reconciliation and position reconciliation, which hopefully will make life easier for Cisco.”

Others pointed specifically to a growing industry focus on AI that should provide Cisco with new growth opportunities.

“Overall, we find that Cisco’s portfolio consolidations focused on bolstering its AI, security, and cloud capabilities pave the way for Cisco to better capitalize on the AI megatrend and the prioritization on organization-wide security implementations including full integration of hybrid and mutlicloud defense,” The Futurum Group noted in a report. “The portfolio realignment and organizational restructuring underpin Cisco’s return to growth path in 2025 across the burgeoning AI era.”

Robbins bolstered that point by stating Cisco was “shifting hundreds of millions of dollars into AI, into AI networking for cloud, into AI infrastructure, silicon, and cyber. It’s a meaningful shift but we feel like the market’s moving so quickly we have to do it.”

What about Cisco networking? Herren did add that despite the latest moves, networking remains an important market for Cisco.

“Networking continues to be incredibly important to us and we'll continue to support that space as well,” Herren added. “But it's looking for efficiencies as we look across the company really in every way so that we can take those resources and allocate them into the fastest growing spaces.”

Sanchez noted that Cisco’s deemphasizing of the networking space is just a case of following the money.

“Those are your cash cows that will continue to pay dividends and keep the lights on, but they’re not growth markets,” Sanchez said of the overall networking space. “Are you happy just going after that single-digit growth, or do you need to show how you’re playing in the new landscapes that are growing fast and ultimately may become tomorrow's big cash cow?”