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Cisco Simplifies; Cuts 6,500 Jobs

Cisco Systems Inc. (Nasdaq: CSCO) CEO John Chambers promised a simpler Cisco, and on Monday, he took steps to deliver. The company announced it is cutting 6,500 employees -- 2,100 of them via a voluntary retirement program.

Cisco says 15 percent of those cut were at VP and higher levels. The whole culling represents a 9 percent reduction in force -- a number that will mean more to the investors who have watched their Cisco shares stagnate over the past decade than to those who are emptying their desks into boxes this evening.

Cisco says about $750 million of the charges against earnings incurred by the layoffs will be recognized during its fourth quarter, which ends in July.

Why it matters
Cisco's efforts to relieve its bloating (and investor nausea) have been fairly well documented. This is a big step in the process of cleaning up a confusing enterprise and making it easier to understand and less tied to the whims of the consumer marketplace.

For more

— Phil Harvey, Editor-in-Chief, Light Reading

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Pete Baldwin 12/5/2012 | 4:58:52 PM
re: Cisco Simplifies; Cuts 6,500 Jobs

Early on, someone had told me Cisco was targeting 5,000 to 15,000 cuts.  5,000 seemed reasonable; 15,000 seemed way too high.


6,500 doesn't feel that surprising.  I still wonder, though, if Cisco is cutting more than it ought to, just to appease Wall Street.


The total of 11,500, including Juarez, is more than I'd expected. But then again, I didn't realize Cisco had 5,000 people there -- now that I know that, selling the set-top plant was a no-brainer.

DCITDave 12/5/2012 | 4:58:51 PM
re: Cisco Simplifies; Cuts 6,500 Jobs

I guess we can't run this photo for a few days:


http://www.lightreading.com/document.asp?doc_id=209970&image_number=4


Anyway, what areas of the company do you see getting stronger as a result of this restructuring? We've pondered the cuts, the changes, the divestitures, etc. Now I wonder: what will be the first thing to improve?


 

rainbowarrior 12/5/2012 | 4:58:51 PM
re: Cisco Simplifies; Cuts 6,500 Jobs

Phil,


Why do you assume this will be the beginning of an improvement and not a death-spiral?


It's very hard to gain momentum after going from Wall Street hero to zero. 


Cisco is going home to Networking to find that it's lost the high-end to Juniper, the service end Alcalu, Appliances to vendors like F5 and the Enterprise to HP. Optical and wireless are already dominated by Ericssson and Huawei as well as AlcaLu.


Is it true that you can't go home again?


Once proud Nortel tried to return to it's roots after an adventure. Look what happened there....


 

DCITDave 12/5/2012 | 4:58:50 PM
re: Cisco Simplifies; Cuts 6,500 Jobs

Two words: John Chambers. If he's still got at least one hand on the steering wheel, this setback gives Cisco a license to be aggressive again. That means pricing to win, turning up the pressure on sales and acquiring in strategic areas -- watch out Riverbed, BlueCoat, etc.


Nortel was too big a mess and it tried to return to its roots during the first few ticks of a recession. This is definitely a story with upside.

optiwizard 12/5/2012 | 4:58:48 PM
re: Cisco Simplifies; Cuts 6,500 Jobs

This is the easy tric, just cutting 6500, but how will CISCO turnaround their declining trend ?


A company lives from its customers and most of the end-customers of the equipment don't like the model that this company introduced in the market. You pay some money when you buy the equipment but afterwards CISCO charges the end-customers for every bit and second of support thay they need. You can fool end customers for a while with such a strategy, but in the long term these customers will run away from your company as fast as possible.


CISCO just became too big and the only way forward is to split the company in fast moving new companies. If they don't choose that path, they will follow Nortel ...


 

Phil Morrison 12/5/2012 | 4:58:48 PM
re: Cisco Simplifies; Cuts 6,500 Jobs

Let's not attempt to compare one company that suffered from several "accounting" scandals to another that simply lost it's way.


I'm assuming that John Chambers always had at least one hand on the wheel during this ordeal. 


FYI Cisco has always been aggressive.  Just speak to their channels and I think they'll give you a view into their "aggressive" tactics.


Cisco normally reduces headcount by 5% yearly, so this headcount reduction isn't as aggressive as you might think.  Selling off manufacturing is a no-brainer..

scfm 12/5/2012 | 4:58:47 PM
re: Cisco Simplifies; Cuts 6,500 Jobs

Just to see if we can't start a new line of unfounded rumor, uh, I mean discussion, I can't help noticing the similiarity between the number of layoffs and a certain product line that they have.


If you read the fist line of optiwizard's post very quickly, you might get the wrong impression:-).

Pete Baldwin 12/5/2012 | 4:58:46 PM
re: Cisco Simplifies; Cuts 6,500 Jobs

scfm -- Yes, I was noticing that too. Excellent rumor!!  :)

RMALVIYA560 12/5/2012 | 4:58:44 PM
re: Cisco Simplifies; Cuts 6,500 Jobs

If 15% of those downsized were VPs and above, it would make such senior profiles in the range of 900+, way too many VP and above profiles!

Pete Baldwin 12/5/2012 | 4:58:43 PM
re: Cisco Simplifies; Cuts 6,500 Jobs

15% of 6,500 = 975 cuts of >= VP level. We don't know how many VP+'s are left.


I don't know -- I think I'm OK with those numbers. Cisco had more than 70K people; is it plausible that thousands of them are VPs? Could be.

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