Cisco to Cut Thousands of Jobs in Its Biggest Layoffs in History

Cisco layoffs BOSTON – Cisco Systems Inc. is expected to cut thousands of jobs in possibly its worst-ever round of layoffs, to meet Chief Executive John Chambers' goal of slashing costs by $1 billion.

Four analysts contacted by Reuters estimated that the world's largest maker of network equipment will eliminate up to 4,000 jobs in coming months, with the average forecast at 3,000. That would represent 4 percent of Cisco's 73,000 permanent workers. It also has an undisclosed number of temporary contractors.

Cisco's previous record of layoffs was set in fiscal 2002, when the company shed some 2,000 jobs, according to Canaccord Genuity analyst Paul Mansky.

That was back when the Internet bubble burst, ending a period of unrestrained spending on technology products as Internet start-ups and old school companies alike rushed to establish a Web presence.

But this time, Cisco cannot point to bad market conditions or a weak economy as excuses for wielding the ax to its payroll. Instead, Chambers last month took responsibility for mistakes in managing Cisco, saying that it needs to focus on its core businesses and be more disciplined about expanding into new areas.

Thus, some of the layoffs are expected to come from businesses that Cisco pulls out of in coming months. Chambers, who has led Cisco for 16 of its 26-year history, has said that he will pull out of some non-strategic areas where Cisco is not the No. 1 or No. 2 player.

A month ago, Chambers said Cisco would dump its Flip video camera business, ax 550 jobs and take a charge of $300 million related to the move.

He has yet to disclose which business will be next to go, but Cisco has invested heavily in a wide range of consumer products that have yet to take off, including its Umi home video conference system and home security cameras.

Cisco said on Wednesday that it planned to trim its workforce as part of a plan to cut some $1 billion in costs from its annual budget. Executives declined to comment on how many jobs they will cut, saying they will make an announcement by the end of summer.

Wall Street analysts, who were disappointed with the low revenue forecast that Cisco gave for the current quarter and the coming fiscal year, said that they were pleased to see Cisco taking quick and decisive action on restructuring.

"It's hard to criticize the pace and scope," said Colin Gillis, an analyst with BGC Partners. "We all love the billion dollars in cost savings, but you never cheer people losing their jobs."

Nonetheless, Cisco shares fell 4.8 percent on Wednesday, as analysts said it would take many quarters to revive the company.

One of Cisco's key challenges will be to boost the revenue and profit margins of its single largest business - selling switches that form the backbone of the Internet and corporate networks - with a smaller workforce.

That unit's sales have fallen in the past two quarters amid steep competition from Hewlett-Packard Co. and Juniper Networks, whose sales are growing.

Cisco's planned job cuts stand out at a time when most other U.S. technology companies have started to add jobs after cutbacks during the recession. HP said last week that it was hiring more people to sell switches.

Cisco Chief Financial Officer Frank Calderoni said in an interview late Wednesday that he did not know when sales of switches will start to grow again.

"Part of the issue in there is competing with lower-priced competitors," said Alkesh Shah, an analyst with Evercore Partners. "By cutting these costs - as well as being more aggressive in pricing - they will be able to be more competitive."

(Reporting by Jim Finkle; Editing by Richard Chang)


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flyfishy2k

oh my whats next one problem after another god have mercy on our souls

May 13 2011 at 9:13 PM Report abuse rate up rate down Reply
Escalonz

Is there such a thing as blacklisting companies who out source jobs overseas or company products that have moved their manufacturing over seas? If not why not?

May 13 2011 at 7:57 PM Report abuse +1 rate up rate down Reply
1 reply to Escalonz's comment
Escalonz

How to? It should be a public information service done by the government to protect
American jobs.

May 13 2011 at 8:10 PM Report abuse +1 rate up rate down Reply
Mingo

I'm not worried about so called job losses. The president promised jobs for all that are working lol and hundreds of thousands of government jobs watching over the americans .which we can't afford one. we are now borrowing money to hire more government people. Sort of a spy in every closet .Hmm where have we heard of those jobs before

May 13 2011 at 7:57 PM Report abuse +2 rate up rate down Reply
Augie Sodaro

So, will Mr. Chambers take a cut in pay so that he can save the company? Wonder what his annual salary is? If we cut him, it would probably represent the salaries of the 3000 to 4000 that will be let go, Huh?

May 13 2011 at 7:45 PM Report abuse +1 rate up rate down Reply
eledude

I agree with that bet chuck. Yet another electronics place succumbing to cheap foreign labor to fatten their white collar wallets. Have already suffered that fate. Then the powers that be say we don't have enough science or tech saavy people. There are plenty of us out here powers that be. Your corporate buddies don't want to pay and are willing to sacrifice American jobs and quality product to get the bigger yacht.

May 13 2011 at 7:43 PM Report abuse +2 rate up rate down Reply
chucki42

bet you a $1 the jobs will be outsourced to another country.

May 13 2011 at 7:29 PM Report abuse +1 rate up rate down Reply
mimsysc

BUT but but, we are in "recovery", remember the summer of recovery?

May 13 2011 at 6:58 PM Report abuse +1 rate up rate down Reply
1 reply to mimsysc's comment
Escalonz

Yes, I remember and the recession was over..................so glad I puked.

May 13 2011 at 8:03 PM Report abuse +1 rate up rate down Reply
kikibeeg

Dear John,

Get rid of all the employees in India first before the US.

May 13 2011 at 6:41 PM Report abuse +4 rate up rate down Reply
JimB

THEY ARE NOT CUTTING JOBS ...... THEY ARE "OUTSOURCING" THE JOBS OVERSEAS .....

May 13 2011 at 6:12 PM Report abuse +4 rate up rate down Reply
A yahoo contributor

Well the best is to boycote that company and do not buy anything that CISCO sale or produce and then these CEO and the owners don't make any money they will see how it feels to be broke. but have no fear the president Barala Obama will bail them out with billions of dollar!

May 13 2011 at 6:07 PM Report abuse +4 rate up rate down Reply

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