Cisco to cut 4,000 jobs
money.cnn.com
money.cnn.com
Guesses at possible explanations that seem more likely:
1. Cisco overstaffed in anticipation of larger future growth that didn't materialize, and is now correcting for that.
2. Due to productivity increases and/or automation Cisco simply doesn't need as many employees as they previously did to do the same jobs.
3. Some kind of shift between sectors of Cisco's business, with the growth areas being less labor-intensive.
In all seriousness, CSCO should regain today's 10% after hours loss within a month after investors realize cutting 10% of their staff will greatly reduce operating expenditure.
http://en.wikipedia.org/wiki/List_of_acquisitions_by_Cisco_S...
I had some relationships with Cisco as a vendor and talked informally to business people there. I can share my microscopic experience. I was surprised by the level of bureaucracy: wasting time in meetings (obviously via WebEx), project managers that only tick items, people who are in charge and don't know anything about the subject (and are not interested in learning).
Reduced headcount forces automation which might have been politically resisted for years, reduces complexity (giving customers a more consistent service), and makes managers bite the bullet and get rid of 'employees that are not bad.. but definitely not good either'.
Having ridden them out... twice now, at 2 big companies, the people that go are usually the people you'd predict, but the atmosphere it creates is horrible and really effects the creativity of the company for a couple years.
There's also not much room for error, because if people who are considered good by peers get laid off, trust in management's judgment takes a nose-dive. I remember my dad and his coworkers kind of holding one layoff against management for years, when a highly regarded member of the group was laid off. They were so incredulous people would use it as a running joke, "yeah, but remember these are the geniuses who fired [guy]".
When I told my wife about the Cisco layoffs she remarked .. 'oh ... it is like 2000 again'. This got me thinking. Things are surely different today and I'd say a lot better for capable people. For one, entrepreneurship is much more accessible today due to the lower start up capital needed. Another similarity is that around the Y2K meltdown, anyone who knew HTML was calling themselves a web programmer. I see a bit of that these days. But not to the same extent. And I don't see large corporations hiring such people to the same extent that web startups hired. As another commenter mentioned ... these people may not have had the right skills. My guess is that the older workers will bear the brunt of the axe. This reinforces my belief that knowledge capital is very ephemeral in tech.
A final note: I feel very bad for the people losing their jobs. I think rationalizing it based on economics or that the company has fiduciary responsibilities to its shareholders is foobar. I truly believe the HN community contains the next set of leaders in the tech industry. It makes me sad how insensitive comments are to Cisco employees. Sure, many will find jobs soon. Many will also have sleepless nights. The tech industry is renowned for meritocracy and our professionals are perhaps the least organized of all. We need to be compassionate.
It depends on what you invest in. Some areas are incredible long lived, like compilers (esp. parsing!), Unix scripting, C, Fortran. Even Cobol.
More like, "we can't afford to spend time on automation now that we lost a team member!"
As a former CCNA/CCNP student I can attest that if Cisco bureaucracy is anything like their online courses it must indeed be a huge timesink and money hole.
Another angle to this is that they are not really that overstaffed and have the ability to lay off cisco employees and outsource the work. In essence shifting cost from one area to another. Without all the drawbacks of a full time employee. All at once so everyone can move forward.
For example the person in job "x" being paid $x dollars is the not same as an outsourcing job "x" and paying the outsourcing company "$x" dollars.
One cost is easier to get rid of (vs. laying off employees) and would be shown in financial statements in a different and possibly more advantageous place.
The thing about quarterly earnings reports is that usually the CEO can see stuff on the horizon (say 2 or 3 quarters away) which may be big problems. When CEOs see these things they do two things simultaneously, they prepare the markets for missed targets and they launch internal efforts to mitigate the impact. I was reading both of these in the statements made by Chambers.
[1] http://www.bloomberg.com/news/2013-06-25/cisco-china-sales-v...
So, it is sufficient that Cisco not grow at rates investors expect, current quarter and next quarter, to disappoint them. If the company were shrinking or in negative growth the stock would be a lot lower.
I don't know which BUs are affected by this but I'd be unsurprised to find it's all from acquisitions that are between 2 and 5 years old.
Dev -> Dev Group Lead -> Dev Director -> Engineering Director -> Single Product VP -> Multi Product VP -> Product Range SVP -> Market Sector SVP -> C-Level Exec.
You can start to see where there is fat to be trimmed... Or in sales:
Account Manager -> Area Sales Mgr. -> Regional Sales Mgr -> Regional Sales Director -> VP Regional Sales -> SVP Market Sector -> SVP EMEAR -> SVP World -> C-level Exec.
It boggles the mind.
More on their indian strategy: http://forbesindia.com/printcontent/32858
Maybe regular layoffs are a way to "force" some efficiency into the system, to cut out some fat, even if you end up losing some good people with the bad.
The promise of regular layoffs is also an excellent way to keep your employees toeing the line. Not everyone is a 25-year-old web developer with three competing job offers at all times.
Departments will start scheming ways to make themselves an artificial dependency on daily operations "You can't fire the [team], they handle approvals for [newly invented step in process]!" Pretty soon you have entire floors full of people who's entire full time job is essentially keeping their full time job.
I'm inclined to think that once you're out of "startup mode" your company's efficiency will have more to do with its culture than its headcount.
My advise: if you interview a person who has been fired from big corp. then don't form any preconceptions against that person based on that fact alone.
When the stock dives, it's because the market thinks the company management knows something the market doesn't.
[1] http://www.cisco.com/web/about/doing_business/corporate_deve...
And especially(this one thankfully not included) the number of articles which talk about it like it's a bad thing.
"like I'm five"
Ok here it is for a 5 year old.
You have a 10 lemonade stands staffed by 10 people. You've had a good year and have made money. But next year you will loose 3 of the stands and so you are going to get rid of three people because they won't be needed even though you made money fine this year.
Same reason that someone who's "rich" and "makes good money" would still negotiate the price of their new BMW/Mercedes or their house.
From here down isn't especially for five year olds, but I think it's still graspable.
Running a company properly (by many investors' definition) is an optimization problem, not simply a constraint satisfying problem. If you can have 4000 fewer employees and be more profitable in that state than in yesterday's state, investors will expect you to do that, even if you're currently profitable. (The costs [monetary and morale] of doing layoffs inject a certain amount of stabilizing hysteresis into the system.)
Would add to that statement that even if you have the money to some people negotiation is fun (such as myself). It's a game same as people play other games where money isn't even involved.
Add: What I'm saying doesn't apply to Cisco or companies so much as the statement you made as far as "rich" people or people where it's not the money that matters.
But it doesn't follow that it's a good idea to just spend them on anything, you need to spend them on something with a chance of giving you a return. If you have a division that isn't giving you a return, and you don't see a way of changing that, keeping it around is just a way of making your money disappear faster - which is also clearly undesirable.
Let's say I am a Big Tech Company. I make Gadgets and Widgets. If I decide I don't want to make Gadgets any more and make only Widgets, then I don't need the people who make Gadgets. SOME of the people who made Gadgets could be retrained/repurposed to make Widgets, but some can't (or don't want to). Those are the people whose jobs I will cut. And of course, I will use some of my "tons of cash in the bank" to give them severance packages to compensate while they search for jobs in other companies who make Gadgets.
Employees cost money. Companies want to cut costs.
Like government, large companies provide a sheltered environment where things happen that couldn't survive out in the real world. Sometimes that's high risk research - Google X, the Manhattan Project. Usually it's people who don't know excel supports formulas, and departments that could be replaced by a web form.
These are protected by many layers of politics, and natural human compassion by managers at all levels who don't like firing people.
Every layoff I've seen, the subtext has been 'lop off the deadwood'. They would make up a reason, but everyone would know.
Cisco earnings report: http://newsroom.cisco.com/release/1236468/Cisco-Reports-Four...