Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Cisco's Coming Layoffs Will Be Huge, Analysts Predict

The layoffs expected at networking giant Cisco Systems before July is over are predicted to number in the thousands and could easily eclipse the 2,000-job cut the company took in 2002, according to four analysts surveyed by Reuters.

Cisco COO Gary Moore confirmed on a conference call with analysts Wednesday that job cuts are coming, and CEO John Chambers made repeated references to plans for Cisco to exit businesses where it is not already a number 1 or number 2 player in the marketplace and to take $1 billion out of annual operating expenses.

During the conference call, CFO Frank Calderoni said that Cisco’s headcount as of the close of the quarter was 73,408 and that 40 percent of that number constituted jobs added through acquisitions of other companies. The four analysts that Reuters asked said the company could cut up to 4,000 jobs, with an average forecast of 3,000. That would amount to 4 or 5 percent of Cisco’s workforce.

That number could be mitigated a bit by the early retirement program that Cisco has initiated. Chambers mentioned it a few times during the conference call, and as yet it’s unknown how many Cisco employees will take advantage of it. Calderoni said to expect a one-time charge in Q4–the current quarter–ranging from $500 million to $1.1 billion depending on how many employees decide to jump. They have several more weeks to decide. We’ve already seen a lot of early departures within the ranks of its upper management. And given its 26-year history, there are probably many people who are in a place where they can double dip, taking a severance or retirement package from Cisco and then move straight into another job.

Analysts have been all over the map in their critique of Cisco’s attempt to turn things around. Generally they’re positive on the resolve of Chambers and the rest of his team to cut back on operating expenses and exit businesses that Cisco can’t dominate, but that leads to bigger long term questions. Will the cuts be enough? And will Cisco be able to properly defend its traditional turf in the networking businesses from persistent attack by Juniper Networks, and other upstart players like F5 and Hewlett-Packard, which has been winning new accounts by offering a 20 percent discount to customers who trade in old Cisco gear.

While it’s never a good time to lose one’s job, the timing could certainly be worse. Hiring at tech companies, especially in and around Silicon Valley, is surging both at established companies like LinkedIn and at start-ups. A recent survey by Silicon Valley Bank found that 83 percent of start-ups expect to add jobs during the year. Time at an industry titan like Cisco has to count for something.

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