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Updated with Cisco Confirmation: If you want to know how bad it is going to get for all of us in Silicon Valley, just look at Cisco Systems. For first time in its history the company is going to shut down for four days at the […]

ciscologoonwallUpdated with Cisco Confirmation: If you want to know how bad it is going to get for all of us in Silicon Valley, just look at Cisco Systems. For first time in its history the company is going to shut down for four days at the end of the year, according to a report by UBS Research. Remember when such shutdowns were associated with industrial era companies? Well, this is the new past as they say. I heard that a major internal annual event has been put on hold as well.

Cisco’s four-day shutdown is part of an effort by the company to save $1 billion. It might be more than just cost savings because Cisco (and many of us) doesn’t have visibility into 2009. Cisco, as a company has just seen Wall Street, a major customer shrink in size. At the same time it is facing low-cost competition from Dell, HP and Huawei. The New York Times is correct in identifying HP’s ProCurve businesses as slowly becoming a major competitor to Cisco. “HP is a much more formidable challenger to Cisco, and it has sent an obvious message,” Nikos Theodosopoulos, an analyst at UBS Securities told The Times.

Cisco has confirmed the shutdown and other cuts in a blog posting pointing out that it had started talking about these initiatives following its Q1 2009 earnings release

We will be target reductions in travel and discretionary-related expenses, including offsites, outside services, equipment, events, trade shows, marketing and other activities.  As part of this effort, we will also implement a year-end shutdown of the US-Canada theater from December 29, 2008, through January 2, 2009 (note that January 1 is already a holiday).  There will be some exceptions for targeted business-critical teams including technical assistance services and channel partner and customer product ordering services.  

While this is not our first year-end shutdown as we followed this longstanding Silicon Valley practice in our early years as a company, it is our first in over a decade.  Given the difficult macroeconomic conditions, we believe our cost control focus at this time is appropriate while still providing our partners and customers with critical services over the holiday period.

  1. [...] How bad is the network gear market? Bad enough that Cisco (CSCO) is planning to force its staff to take four days off at the end of the year, according to a UBS research report summarized by GigaOm. [...]

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  2. [...] shutting down and scaling back, in any language, is real.  And when it’s Cisco that’s doing it, well, children, pardon my French, the shit hitting the fan is gonna smear us [...]

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  3. [...] to keep its margins healthy during the downturn. Citing UBS Research, GigaOm has reported that Cisco will shut down operations for four days at the end of this year to save money. This follows other reports that Cisco has [...]

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  4. [...] Cisco will be shutting down its offices for the first time in the company’s history for four days at the end of this year in order to save some bucks, according to UBS Research summarized by GigaOm. [...]

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  5. This has everything to do with maintaining earnings growth when your major customers are pulling back. It is not that Cisco cannot afford to ride through the storm, they obviously can, it has to do with their ability to keep their metrics pointing upwards.

    Obviously most companies dont have this luxury………

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  6. Don’t see a big deal here, if Cisco works 200 days, 4 days shut down is cutting 2% of the workload, they could let the workers work but now they want to save that cash, probably with no loss of productivity at all.

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  7. Hate to sound obtuse, but how does this save them money? Is the workforce not paid for those four days, or are they forced to take it as vacation?

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  8. [...] to this some details from Om Malik, who claims that an “major annual internal event” has also been postponed, and you must [...]

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  9. If they are forced to take it as paid vacation then the overall outstanding vacation is reduced on their financial statements. If it is unpaid (which I doubt) it saves wages.

    I worked at a large tech company that did this almost every year. No one minded because everyone took that time as vacation anyway. However, with an official shutdown the company saved power and heating and basic staffing costs of already mostly empty offices.

    This just shows Cisco is serious about cutting costs right now.

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  10. Sounds like a smart thing to do to cut costs, 4 days is not a big deal it’s barely a week.

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