Is Cisco Suffering Brain Drain?

Cisco Systems Inc. (Nasdaq: CSCO) seems to have taken a turn for the better this year, but it's facing a new problem: attrition in engineering, according to one analyst.

"Competitors seem to be hiring away Cisco engineers at a high rate, and in addition to losing mid-level engineers, Cisco is starting to lose its limited 'Distinguished Engineers,'" Mark Sue of RBC Capital Markets writes in a report issued Monday.

As much as people talk about Cisco as a marketing machine, it really does depend on a strong engineering force. Engineers comprise about one-third of the company's more than 63,000 employees, Sue writes.

He writes that it's happening because Cisco's restructuring created "rifts" in the organization. Cisco laid off some staff earlier this year and reassigned some of the employees who were kept on.

Cisco sent Light Reading an official statement saying, in effect, that any ongoing attrition is a fact of life, and the company is willing to hire people to fill any gaps:

Cisco has been forthright about the changes that it needs to make to its business to drive profitable growth and productivity. We continue to act quickly and decisively to execute these changes. As part of this evolution, we expect departures. Our action plan addresses the opportunity to strengthen our leadership bench with both internal and external talent.

"Cisco has begun to acknowledge the problem, which is an important start to stemming the departures," Sue writes in his report. His suggestions: Give engineers a deeper sense of purpose by bringing them more intimately into the product-development cycle, and put engineering under the lead of just one executive, namely, Senior Vice President Pankaj Patel. He's been co-leading engineering with fellow Senior Vice President Padmasree Warrior.

Sue's report doesn't overtly suggest that Cisco is doomed or even sinking. But he does think the engineering thing is important. "For Cisco to be successful, it needs to excel in both sales and engineering," he writes (emphasis is in the original).

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Keep up with Cisco's reorg and recovery:

— Craig Matsumoto, West Coast Editor, Light Reading

rhr 12/5/2012 | 4:48:17 PM
re: Is Cisco Suffering Brain Drain? Does the report's author name some names and where they have gone?
Pete Baldwin 12/5/2012 | 4:48:15 PM
re: Is Cisco Suffering Brain Drain?

No, he didn't, although he did say the departures are to competitors (an important distinction because some people have been leaving networking altogether for, say, greentech).

I don't think Cisco is surprised by any staff departures, btw. Projects have been canceled and responsibilities juggled, and someone's bound to really hate the changes. The bigger point to take away might be that while Cisco's restructuring is done, the dust isn't settled yet.

usernametaken 12/5/2012 | 4:48:14 PM
re: Is Cisco Suffering Brain Drain?

As someone who was "Distinguished" at Cisco, I'll provide a couple of data points:

1. There are plenty of talented folks at Cisco. A few people leaving here & there is just noise among the signal. Always has been, always will be. I guess that if you stated that it wouldn't make for a good headline.

2. Your article states that many people have been leaving because of changes. In my case, I left because I felt there wasn't enough change happening.

Yes, I am still in the "networking sector."

rzerockzeron 12/5/2012 | 4:48:13 PM
re: Is Cisco Suffering Brain Drain?

Good point Seven. I guess it really depends who will, in the end, drive the vision behind the changes

a leader hell-bent on his/her vision, which Cisco is only a delivery vehicle, not a means to a (financial) end - Apple

Managers or even bean counters, but hopefully with real world business acumen - IBM

Techies with great ideas but lacking the points aforementioned - NT, LU.

I am not a Cisco insider so let me ask - who will it be?


paolo.franzoi 12/5/2012 | 4:48:13 PM
re: Is Cisco Suffering Brain Drain?

"The bigger point to take away might be that while Cisco's restructuring is done, the dust isn't settled yet."


I think we have just started to see the first of many rounds until expectations align with reality a bit more.  Don't get me wrong, I think this is a fine business.  Until people say, yep we are spinning off cash like mad but have no real growth plan to justify a huge jump in share price.  Go to yahoo.finance.com and put a "MAX" setting on the chart.  What you will see is complete stagnation over the last 10 years.  Not 1 year, not 3 years, but 10 years.

The investing community is givng Cisco a P/E similar to that of say Proctor and Gamble.  It is well deserved.  So, there are really three choices going forward:

Cisco reorganizes to become another growth mega-machine (see Apple).

Cisco realizes that it won't do that and becomes a more stable stock that has to redo its growth curve based on a new business model (see IBM).

Cisco flails around and shoots itself in the foot (see Nortel and Lucent).

But if you think the "reorganization" is done, then you are in for an eye opener.  Things will get much more fun than that.



Pete Baldwin 12/5/2012 | 4:48:13 PM
re: Is Cisco Suffering Brain Drain?

Good points. Thanks for posting.

So, you left because there wasn't enough change? Care to elaborate?

eaqle3c 12/5/2012 | 4:48:12 PM
re: Is Cisco Suffering Brain Drain?

its a typical shake down, sometimes quite necessary for a company that has the tendency to become a little top heavy. "senior and distinguish" people leaving is a way to shirk complacency and create new opportunities but the question is will cisco suffer? In short term you might think so, but since cisco is such a big ball rolling even in engg department things will move on in the right direction.

In the long term its good for people leaving and cisco.

Another point to note is that many people return back, with more varied experience from different companies.

This will happen evry 3 years.

-0 12/5/2012 | 4:48:05 PM
re: Is Cisco Suffering Brain Drain?


Techies with great ideas but lacking the points aforementioned - NT, LU.


Now you have my full attention. Who were "techies with great ideas" in Nortel? Was it Zafirovski? Or may be Dunn? By now nobody have any doubts that they had had great ideas in the field of personal gains but it's the first time in years someone called them 'techies'.


Pete Baldwin 12/5/2012 | 4:48:04 PM
re: Is Cisco Suffering Brain Drain?

Seven -- I was talking about "done" in the very literal sense, as in, the things Cisco said it would do in May are "Done."  But yes, you've got a good point about more things to come -- in fact, look:


Cisco Reorgs Again, Folds Net Management Into New Cloud Group

rzerockzeron 12/5/2012 | 4:48:00 PM
re: Is Cisco Suffering Brain Drain?

if you believe I was referring to Z or Dunn(ce), you have it all wrong.

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