Update: Cisco Layoffs In The Offing?

26 Comments

Cisco Systems has a new chief financial officer in Frank Calderoni, who is replacing Dennis Powell. He officially starts his gig on Friday, Feb. 15. And as all good finance folks who know how to count pennies, Calderoni might have to oversee a round of layoffs at his new employer.

Sources are telling us that the company is looking to trim headcount in divisions that are not bringing in the bucks. The cuts are going to be big enough to raise an eyebrow. I am trying to chase down the actual size of the cuts and will update the post later. I checked with Cisco’s (CSCO) public relations department and a spokesperson emailed this response:

Cisco does not comment on rumors or speculation. I can tell you however, that Cisco constantly reviews ways to streamline and optimize business processes for improved efficiency and increased shareholder value.

As discussed on Cisco’s results conference call last week, at the end of Q2 Cisco headcount totaled 64,087, a net increase of approximately 1,000 from Q1 FY’08. We will continue to invest in headcount in the areas where we see continuing opportunities for growth.

Cisco reported its fiscal 2008 second-quarter earnings earlier this month, and gave a lukewarm forecast for the remainder of the year. Wall Street analysts were disappointed by the 10 percent year-over-year growth outlined by Cisco for the April 2008 quarter.

Cisco also missed its own internal bookings targets for the first time in five years, indicating that things aren’t all that kosher, not only for the company but for the tech industry overall.

Update: In the Austin office of Cisco’s Remote Operations Services division, Cisco laid off 50 people, citing a reorganization of the ROS division, which was created in 2004 after it purchased network monitoring company, NetSolve. The Jan. 30 layoffs left 250 employees working for Cisco ROS in Austin.

26 Comments

suire

It is not easy to get information about layoffs. Even managers will not know about it. So it is almost always speculation.

po.an

hah!! A year nearly and counting.. No layoffs yet.. Mr. Malik, any comments?

Hemalatha Manohar

Cisco has decided to layoff nobody. Some internal restructuring have been done and may perhaps take place in the recent future. However, no layoffs is promised as there is no need for the same. All new hiring is frozen indefinitely until mid next year.

gc

In the event of a layoff, how will the incoming new employees who just got hired last fall but haven’t started working until this summer, be affected? I heard from my sources that CSCO did revoke offers in 2001, but the current recession is nowhere as big as the 2001 bust in the tech sector. Should I, as a pending new hire, be worried?
Sincerely,

blog

there are several great points here. a few others i’d like to make

CAGR Salary growth in China and India, is double digits, between 10-20% per annum. US CAGR is negligable. If India is 64k already, on a cost basis relocating staff to india makes little sense, especially when computing a 5 year forecast plan like JC likes to do.

Headcount costs are an overly simplified and myopic metric, but simple to compute. American Corps get tax benefits for offshore opEX, there are revenue and branding and licensing profit diversions, and lax regulations, and taxes advantages in emerging markets.

the real issue is building R&D organizations which produce world class products. to collaborate efficiently in offshore/multisite development. headcount costs don’t consider any of these costs. research shows that core development teams working in a geographic in areas of core competency, way out-perform, the overly simplistic ‘offshore headcount’ paradigm. google understands this, and manages accordingly. thats why they continue to invest all over, especially in the bay area.

JC hasn’t done a very good job of managing CSCO; he pretty much grows it into boom then bust. In 2001, he claimed it was his biggest failure, yet here we go again.. surprise surprise.

Cisco is too big, should be split up in to fledgling emerging market companies, which would permit a greater share valuation for investors and employees. You can’t aggregate 60% growth in a small emerging market into a large 10%/annum growth company, it just doesn’t scale.
But JC insists.. this is the way.

Cisco has lost 2 extremely excellent CEO replacements cause of chamber’s obstinate ways. If JC does this at the top of CSCO, the raises and career growth opportunities, are certainly stiffled. The CEO sets the tone for the entire organization.

so again, the employees feel the pain, of staff compression, layoffs, workload expansion, little stock appreciation, disruptions, shareholders get marginal appreciation, and the industry gets expensive moderately emerging products.

Moving CSCO around the globe won’t make it perform better. The problem resides here on Tasman… ,

Chambers continues to sail the ship of Cisco, like Capt’n Jack, down the next trough, into the next big swell, employees and products swept overboard.

Matt

Stock options aren’t worth anything if the stock doesn’t go up. So how can you say shareholders suffer but management is making a windfall on stock options?

shhh

Cisco laid off hundreds of employees (US and Canada) in October 2007 and replaced those employees with new hires in India. Not a peep on the web about that layoff. Job reqs in Bangalore about 500 right now.

mmm

Indian Engineers were $6K in 1999 and are $65K now. This comes from a slide preso I was witness to just a week or so ago at a local multinational. Hiring offshore is not the huge cost savings it was made out to be years ago. It makes sense to hire Indian workers for deployment in India but nowhere else. As far as Cisco stock please quit blaming stock options, the problem with the stock markets has nothing to do with one specific issue, it is a market wide thing which is more related to the dollar and overspending by our government than anything else. We have had underperforming markets this entire decade. At this point if I was an investor in Cisco I would rather them give out stock options than hard cash since those stock options seem to have a very low payout.

A

Investors who lost money on Cisco are real people too. They watch their retirement investment
goes down the toilet while Chambers and his employees cash in their stock options. Do remember
that the investors are real people who get affected as well.

Paul

All you folks out there who talk about how much reduction is good for business, do remember that employess are real people who get affected.

H

Cisco laid off 1200 in Q208? Where did you find out? There is no public info as far as I know.
Having said that 1200 is really nothing considering they have 65K employees. With decleration
growth for at least next 5 quarters, the company needs to cut at least 15% of workforce to
align their expenses. Chambers isn’t doing a good job, IMHO.

why

Cisco is a great company. But bogged down in process.
Everyone I know there is pretty much stuck in their position/roles for the past 10 years. Maybe their salaries might have gone up a bit.
They have definitely been sitting there collecting options. But there are No promotions.

Some fat should be let go 10% is good. 15% is great. This is win-win. People inside the company might get promotions and people who are laid off might have good ideas and experience to start innovative new companies.

T

“….. a net increase of approximately 1,000 from Q1 FY’08″…

if we look closely, the net increase are from India/China. as far as I know, CSCO laid off about 1,200 in R&D alone in Q208…

D

I doubt the company will ditch the US workforce simply by looking at the cost of workers.
They will ditch people from the business units that are contributing little or no profit, whether
they are in India or US. They should do one big layoff instead of a few for the sake of morale.
Furthermore, the cut needs to be done across the board which includes middle managers.

Greg Ferro

It is not how many employees are cut but where.

Since one US worker is a cost multiple of workers in India or even Europe the cuts are likely to be in the US. A similar process has been started at IBM, Cisco looks to be doing something similar. Ditch the US workforce because they are not relevant.

I would like to welcome America to the rest of world, nice of you to notice that we are getting along fine without you.

manish jain

Om,

That would be really bad for the overall outlook. As far as Emerging Markets and more so on India, I have not heard them close one big deal so far. Huawei is doing some serious damage. As Sramana pointed out pricing is a hugh issue.

Hopefully, they are still committed to making Bangalore there 2nd HQ termed Cisco East.

Simon

Price is a factor here in the US too. During a boom the ‘nobody got fired for buying Cisco / IBM’ thing works and they certainly charge a huge premium for their products. When times are tighter customers will either postpone spending on infrastructure, or at least consider more cost effective products – particularly in new technologies like 10 gig Cisco are several times more expensive than Force 10 and co…

D

With 70K employees, the company will have to cut at least 20% of workforce to make any meaningful
expense reduction. 5% won’t do! They can fire many first and second level managers who sit around
and collect stock options.

Om Malik

@Tom,

I am going to wait till i get the right numbers. I refuse to speculate on the total number. I have published confirmed information and for now I am just comfortable with that.

Tom

Big enough to raise an eyebrow. How large? Hundreds, Thousands, Tens of Thousands?

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