Cisco restructuring plan will result in ~4100 layoffs; focus on security and cloud based products

Cisco’s Restructuring Plan:

Cisco plans to lay off over 4,100 employees or 5% of its workforce, the company announced yesterday. That move is part of a restructuring plan to realign its workforce over the coming months to strengthen its optical networking, security and platform offerings. Cisco noted in financial filings it expects to spend a total of $600 million, with half of that outlay coming in the current quarter. The company will also reduce its real estate portfolio to reflect an increase in hybrid work.

In a transcript of Cisco’s Q1 2023 Earnings Call on November 17th, Cisco Chief Financial Officer Scott Herren characterized the move as a “rebalancing.”  On that call, Chairman and Chief Executive Officer Chuck Robbins said the company was “rightsizing certain businesses.”

Herren and CEO Chuck Robbins said the company is looking to put more resources behind its enterprise networking, platform, security and cloud-based products.  In the long run, analysts expect Cisco margins to improve as more revenue comes from security and software products.

By inference Cisco is de-emphasizing sales of routers to service providers who are moving towards white boxes/bare metal switches and/or designing their own switch/routers.

A Cisco representative told Fierce Telecom:

“This decision was not taken lightly, and we will do all we can to offer support to those impacted, including generous severance packages, job placement services and other benefits wherever possible. The job placement assistance will include doing “everything we can do” to help affected employees step into other open positions at the company.”

Cisco implemented a similar restructuring plan in mid-2020 which included a substantial number of layoffs.

Growth through Acquisitions:

Much of Cisco’s revenue growth over the years has come from acquisitions. The acquisitions included Ethernet switch companies like Crescendo Communications. Kalpana and Grand Junction from 1993-1995.  Prior to those acquisitions, Cisco had not developed its own LAN switches and was primarily a company selling routers to enterprises, telcos and ISPs.

Here are a few of Cisco’s acquisitions over the last five years:

  • In 2017, Cisco acquired software maker AppDynamics for $3.7 billion. It bought BroadSoft for $1.9 billion in late 2017.
  • In July 2019, Cisco acquired Duo Security for $2.35 billion, marking its biggest cybersecurity acquisition since its purchase of Sourcefire in 2013. Acquiring Duo Security bolstered Cisco in an emerging category called zero trust cybersecurity.
  • In late 2019, Cisco agreed to buy U.K.-based IMImobile, which sells cloud communications software, in a deal valued at $730 million.
  • In May 2020, Cisco acquired ThousandEyes, a networking intelligence company, for about $1 billion.

Aside from acquisitions, new accounting rules have been a plus for revenue recognition. The rules known as ASC 606 require upfront recognition of multiyear software licenses.

One bright spot for Cisco have been sales of the Catalyst 9000 Ethernet switches. The company claims they are the first purpose-built platform designed for complete access control using the Cisco DNA architecture and software-defined SD access. This means that this series of switches simplifies the design, provision and maintenance of security across the entire access network to the network core.

There is also an opportunity for Cisco in data center upgrades.  The so-called “internet cloud” is made up of warehouse-sized data centers. They’re packed with racks of computer servers, data storage systems and networking gear. Most cloud computing data centers now use 100 gigabit-per-second communications gear. A data center upgrade cycle to 400G technology has been delayed.

Routed Optical Networking:

Cisco in 2019 agreed to buy optical components maker Acacia Communications for $2.6 billion in cash. China’s government delayed approval of the deal. In January 2021, Cisco upped its offer for Acacia to $4.5 billion and the deal finally closed on March 1, 2021.   Acacia designs, manufactures, and sells a complete portfolio of high-speed optical interconnect technologies addressing a range of applications across datacenter, metro, regional, long-haul, and undersea networks.

Acacia’s Bright 400ZR+ pluggable coherent optical modules can plug into Cisco routers, enabling service providers to deploy simpler and more scalable architectures consisting  of Routed Optical Networking, combining innovations in silicon, optics and routing systems.

Routed Optical Networking works by merging IP and private line services onto a single layer where all the switching is done at Layer 3. Routers are connected with standardized 400G ZR/ZR+ coherent pluggable optics.

With a single service layer based upon IP, flexible management tools can leverage telemetry and model-driven programmability to streamline lifecycle operations. This simplified architecture integrates open data models and standard APIs, enabling a provider to focus on automation initiatives for a simpler topology.  It may be a big winner for Cisco in the near future as service providers move to 400G transport.

References:

https://www.fiercetelecom.com/telecom/cisco-plans-cut-5-workforce-under-600m-restructuring-plan

https://www.cisco.com/site/us/en/products/networking/switches/catalyst-9000-switches/index.html

https://www.cisco.com/c/en/us/about/corporate-strategy-office/acquisitions/acquisitions-list-years.html

https://www.cisco.com/c/en/us/about/corporate-strategy-office/acquisitions/acacia.html

https://www.cisco.com/c/dam/en/us/products/collateral/optical-networking/white-paper-sp-open-optical-networks.pdf

https://www.prnewswire.com/news-releases/arelion-completes-first-multi-vendor-multi-layer-field-trial-using-acacia-bright-400zr-modules-and-cisco-routers-301651909.html

Heavy Reading: Coherent Optics for 400G transport and 100G metro edge

 

Cable Labs: Interoperable 200-Gig coherent optics via Point-to-Point Coherent Optics (P2PCO) 2.0 specs

Cablecos use of 200-Gig coherent optical signals in their broadband access network progressed following a recent interop event at CableLabs that involved a five suppliers of coherent optical modules.

CableLabs confirmed that equipment and silicon from those players – Acacia (now part of Cisco), Ciena, Fujitsu Optical Components, Lumentum and Marvell – were found to interoperate with the organization’s Point-to-Point Coherent Optics (P2PCO) 2.0 specs [1.].  The number of participants might not be high, but what’s important is that the participants include DSP silicon from multiple manufacturers that represent the majority of the coherent optics industry.

Note 1. The P2PCO 2.0 specs doubled the operating capacity – from 100 Gbit/s per wavelength in the 1.0 specs, to 200 Gbit/s.

Demonstrating interoperability among so many different coherent DSP suppliers bodes incredibly well for network operators as it provides multi-vendor interoperability, which promotes scale and competition.

Image Courtesy of Cable Labs

Cable Labs conducted 100-Gig interops in 2018 and 2019. Those efforts tie into a broader initiative to use coherent optics technologies, typically used for long-haul, metro and submarine networks, to expand the capacity of fiber that’s already deployed on the hybrid fiber/coax (HFC) access network.

The CableLabs specs also describe a new technology called the Coherent Termination Device (CTD), which can be deployed in an outdoor aggregation node.

Matt Schmitt, a principal architect at CableLabs, said the scope of CableLabs’ interoperability efforts focus on the modules on the optical end – basically describing how a transceiver works at the physical layer.

And to help fit the cable network environment, the end of the network using the CTD is made to reside outdoors, rather than inside a facility.

“Almost every other application of coherent that you see, both ends of the link are in facilities,” such as a data center interconnect where many links are densely packed with racks and modules, Schmitt explained. The cable access application of coherent optics might involve one end that does sit at a facility, such as a hub site, with the other end involving the aforementioned field-deployed CTD.

“Those field boxes didn’t really exist when we started this,” he said.

The broader concept is to help cable operators improve the performance of their access network fibers situated between headends and hubs and fiber nodes for a range of use cases, and to do so without getting locked into one supplier.

CableLabs and its partners originally thought this 200-Gig interop would be completed sooner, but it was delayed a bit during the pandemic when travelling and in-person gatherings were limited or non-existent.

But Schmitt said the plus side of that intervening period meant that the interop ended up with wider supplier participation, particularly at the DSP (digital signal processor) level, than it might have otherwise.

Beyond raw capacity, the 200-Gig capability should help to support the new distributed access architecture (DAA), supported by multiple remote PHY or remote MAC/PHY devices, and the cable’s industry’s broader pursuit of delivering symmetrical 10Gbit/s performance to customers on the access network.

Schmitt said 200-Gig technology gets particularly interesting when operators look to support large, high-density areas that are being split into smaller service groups. It might also factor in as operators explore services beyond high-speed data over cable, such as mobile XHaul.

The use of CTDs with pluggable optics is also designed to support a relatively easy upgrade path. If an operator starts with 100-Gig, those modules can be swapped out for 200-Gig modules later.

This point-to-point P2P use case is just one aspect of coherent optics being explored by CableLabs. A separate-but-related coherent PON initiative still uses coherent signaling, but is focused on point-to-multipoint links.

For now, Schmitt said CableLabs doesn’t plan to hold another interop for P2PCO v2.0 products. “It really just worked so well. I’m not sure what more there will be to do in a follow-up interop,” he said.

CableLabs would be open to doing qualification testing for these new P2P coherent products if the market demands it. “Thus far, I haven’t been hearing of a big push for that,” Schmitt said. “I think people have been comfortable with what we’re getting from the interops and doing their own testing to see how it works.”  As for next steps, this latest batch of handiwork will be showcased at the 10G Lab at CableLabs, Schmitt said.

Meanwhile, future commercial deployments will be determined by the availability of CPDs and interest form cable operators.

Among suppliers involved in the recent interop, Ciena confirmed that it currently has interoperable, CableLabs-compliant 200G coherent pluggables available as part of the supplier’s WaveLogic 5 Nano coherent pluggable portfolio.

Another factor for adoption will be costs compared to the 10-Gig DWDM tech that’s in use today. Schmitt acknowledges that the first endpoint is going to be greater with coherent technology, since it involves putting a switch or router in the field.

“Where it gets interesting is every time you need to add another device that’s sharing that same fiber run,” Schmitt said.

“With coherent, you have a higher upfront cost, but you’re going to have a much lower slope, because as you add more devices, all you have to do is add a pair of gray (standard) optics modules – very low cost … Where’s that crossover point in terms of number of endpoints? To me, is going to be one of the big deciders on when and how widespread the deployment of this technology gets.”

References:

A Jolt of Light: CableLabs Holds First 200G P2P Coherent Optics Interop

First Light for CableLabs® Point-to-Point Coherent Optics Specifications

https://www.lightreading.com/opticalip-networks/cables-pursuit-of-interoperable-200-gig-coherent-optics-presses-ahead/d/d-id/779904?