In a move that was expected during a transition period, Cisco Inc. announced it would cut up to 5,500 jobs aiming to reduce costs by some 15%. The company is to lay off roughly 7% of its employees, undergoing a restructuring program intended to diversify Cisco’s core businesses and expand into new markets.

On August 17, Cisco reported revenue of USD 12.6 billion for the fourth quarter, growth of 2% year over year, and announced a restructuring program aimed at boosting revenues in lower growth areas of their portfolio.

Apparently, Cisco is missing opportunities in fast growing segments like IoT, collaboration, next generation data centers, and cloud services and infrastructure. All of these market segments are set to grow at tremendous rate in the next decade or so, while Cisco is still focused on ageing network technologies.

“Today’s market requires Cisco and our customers to be decisive, move with greater speed and drive more innovation than we’ve seen in our history,” the company’s statement reads.

Cisco is in a buying spree in the past quarter, acquiring cloud security firm CloudLock for nearly USD 300 million and spending USD 1.4 billion to acquire Santa Clara-based IoT platform provider Jasper Technologies.

It looks like Cisco have realized that betting on routers and core network equipment is not enough for securing future growth and now switch to growth segments like cloud services and IoT. The Internet of Things market alone is forecast to reach several trillion dollars a year in the next decade with competitors already well positioned on the market.

It is yet to be seen whether the recent cost reduction measures will have positive effect, but one should bet that Cisco would continue their transition from rapidly ageing network technologies toward new businesses. They cannot afford to stick to old-fashioned networking equipment in an era when the average smartphone can act as a router and where IoT is emerging as the next big thing.