Cisco Awaits the Hammer

3:45 PM -- Because Cisco Systems Inc. (Nasdaq: CSCO) has avoided the Big Layoff so far, it's all too tempting to keep asking when the Big Layoff is coming.

Analyst Ehud Gelblum of JP.MorganChase wrote a note this morning saying a 10 percent cut -- that's 6,700 people -- could be on the way soon. Cisco has responded with a statement that doesn't technically deny anything but emphasizes the smaller-scale job cuts the company announced in February.

Specifically, Cisco said then that it's culling 1,500 to 2,000 jobs, a direct result of sales declines. (See Cisco: Still No Layoffs.) That's awful news for 1,500 to 2,000 people, but for a company Cisco's size, it's not much -- especially considering Cisco's reputation for routinely cutting its lowest performers.

What I think still weighs on people's minds is Chambers's transition from cautiously happy-go-lucky to something darker. It adds emphasis to last quarter's announcement of dampened sales and in turn leads people outside Cisco to expect the Big Layoff, because that's what Big Public companies do.

But that would be a shame. Chambers's talk of gaining market share in a downturn is cliché, but it's true. Cisco is still profitable and has plenty of cash, albeit mostly overseas. Now would be the time to keep spending (frugally, of course) to solidify a next-generation leadership spot before the next generation even hits.

Whether Cisco can pull that off or not, Juniper Networks Inc. (NYSE: JNPR) certainly plans to try. (See Juniper Tightens Its Belt and Juniper Cuts Q1 Forecast.)

— Craig Matsumoto, West Coast Editor, Light Reading

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