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Print 24 comment(s) - last by Azethoth.. on May 13 at 5:05 PM

Cisco offers early retirements and layoffs to workers  (Source: WRAL)
Thousands of workers will be cut

Cisco is historically one of the strongest and more profitable technology firms. Its performance over the last several months has declined significantly in the face of increasing competition and the admitted fact that Cisco was trying to compete in too many markets at the same time. Things are not looking good for Cisco and the company is looking at shedding workers in an effort to save money.

Cisco wants to save about $1 billion and is looking at layoffs and many other things to get the company back on the path to increasing profits. WRAL.com reports that Cisco is looking at shedding "thousands" of workers to help cut costs.

Cisco currently has 73,000 workers globally and the company has already eliminated 550 jobs and killed off some of its products that weren't as profitable as it hoped. One of the products that were killed recently was the Flip line of video cameras. 

Reuters reports that Cisco has warned that the overall Q4 revenue would be flat with only 2% growth compared to the same quarter of the previous year. That would imply that profits would be in the $10.84 billion to $11.05 billion range, rather than the expectation of $11.59 billion.

The flat profits led to a decline in stock price with Reuters reporting the stock was at $17.72 per share, down 1%. Cisco CEO John Chambers said that the workers that would be impacted in the layoffs would know soon, likely by the end of the summer. The company has also offered early retirement packages to some workers to cut costs. Chambers said, "Cisco is a very strong company in a healthy market with a few problematic areas."

One of the areas that analysts and investors are looking for growth and detail on is the core switching business that Cisco has been a big part of for many years. CFO Frank Calderoni told Reuters that he could not say when the switching business would grow again. 

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By nolisi on 5/12/2011 1:51:02 PM , Rating: 1
Take note people- here's one of the instances where a company increased sales (by 2% in this case), earned a profit, increased shares above analyst expectations (42 cents/share vs. the 37 cents, a full 12% higher than expected) and are still cutting jobs.

Don't bother to explain to me that they're forecasting missing their sales target- I get that part of it. But a $1 billion shedding of expenses constitutes what could be thousands of employees being laid off when it was the leadership of the company that got them to this point. I'm wondering why they couldn't adjust executive pay/bonuses to make up some if not all the difference? This "shedding of expenses" will likely come mostly (if not all) from the bottom end of the pay scale, from people who had no say in the company's direction and likely did not fail in their jobs (if they had, I'm sure they would have been laid off/fired before this shedding was seen as needed). Again, I think it's important to note that they're doing this in the face of what really can only be called a successful quarter. If the company fails to meet expectations in the next quarter, maybe take it from the leadership instead, who by issuing the warning, is likely negatively impacting their stock.




By MrBlastman on 5/12/2011 2:20:11 PM , Rating: 2
What do you mean? John Chambers only earned 18,871,850.00 last year. That means he only paid himself 471 times the average American pay of 40k a year.

Wait... He could save 471 jobs by just laying himself off! We have a lot of win there. Too bad he's also Chairman of the Board. He should step down--as the executive decisions are clearly the reason Cisco is not cutting it anymore competitively.


By Lord 666 on 5/12/2011 2:22:15 PM , Rating: 2
There are many years he has only paid himself $1.

Why don't you send him an email and suggest he do the same this year as well.


By InvertMe on 5/12/2011 2:35:48 PM , Rating: 2
You do know he more than likely expensed his car, living conditions, food, you name it to the company?

The senior partner at a law firm I support does this all the time. He takes almost no annual pay but his entire life is expensed. Does wonders for him come tax time...


By MrBlastman on 5/12/2011 2:49:18 PM , Rating: 5
There are? When?

Here, I'll give you the last 5 years. I'll let you decide after reading the numbers. :)

2010: 18,871,875.00 Total Comp
2009: 9,158,123.00
2008: 11,159,897.00
2007: 10,984,287.00
2006: 1,656,704.00

It is worth mentioning that his "salary" is kept low @ ~350k/year, he makes up for it with LARGE bonuses (2,031,000 in 2009, 3,500,000 in 2007 and 1,300,000 in 2006) and huge amounts of stock and other forms of comp).

So... I don't see it. Where's the 1.00? Cisco closed at 17.07/share on December 30th. It is 16.98 today. I really fail to see justification for keeping him on the payroll.


By Azethoth on 5/13/2011 5:03:03 PM , Rating: 3
Just round to the nearest million, so 350k becomes 0, which is within $1 of $1. See, math is easy.


By nolisi on 5/12/2011 2:35:52 PM , Rating: 4
quote:
What do you mean? John Chambers only earned 18,871,850.00 last year. That means he only paid himself 471 times the average American pay of 40k a year.


Well done focusing on Chambers' income alone to make your point, awesomely argued. It's a good thing he's the only executive at a company the size of Cisco. Wait...

Chambers is just one of many executives at Cisco who is likely making money measured in millions, and I don't know if your figure includes bonuses, etc.

Basically, if you've got 2-3 dozen people at the directorship and executive level making in the upper hundreds of thousands to tens of millions, I'm sure you can find other ways to help shed $1 billion dollars to adjust for a culmination of bad leadership decisions rather than taking it all out on employees who likely did their jobs.

But again, let's ignore the fact that they're punishing these employees in the face of a successful quarter.


By Azethoth on 5/13/2011 5:05:23 PM , Rating: 1
You need to get rid of the deadwood that is the bottom 5% of your employees. All this whining about how they are just doing their job does not address how poorly they are doing it. they need to go.


By RabidDog on 5/12/2011 2:27:32 PM , Rating: 3
Now sir you tell me the world's changed
Once I made you rich enough
Rich enough to forget my name

Youngstown - B. Springsteen


By borismkv on 5/12/2011 3:13:28 PM , Rating: 2
You do realize that large companies that go through a period of sudden and explosive growth tend to hire significantly more people than they need, right? The vast majority of the workforce that was laid of over the past few years were laid off because they were only providing additional coverage so other employees didn't have to be the only person that is able to perform a specific job (This is known as employee redundancy). A massive growth period requires companies to hire a large number of employees to make sure that they don't overload their existing employees. After the growth period ends, they have to examine their employees to determine which ones they need and which ones they don't. Otherwise they end up carrying dead weight around and in a period where there is not as much growth, or loss, they end up in a seriously bad position. Remember that businesses exist solely to make a profit. If they don't, they disappear and all the jobs that they provide disappear with it.

Now, I would like for you to explain why a business that determines it has employees that are not providing a measurable benefit for the investment of money should keep those employees around.


By MrBlastman on 5/12/2011 3:26:30 PM , Rating: 3
Cisco is different.

In 2008 they had a 20.36% Profit Margin, w/8.052 billion net
In 2009 they had a 16.98% Profit Margin, w/6.134 billion net
In 2010 they had a 19.40% Profit Margin, w/7.767 billion net

These levels of profits are NOT indicative of excess levels of labor. However, their rate of growth...

39.540 billion sales in 2008
36.117 billion sales in 2009
40.040 billion sales in 2010

IS indicative of POOR management execution. The workers are not the ones that should be laid off here. The executives are clearly to blame.

Thus, your argument...

quote:
Remember that businesses exist solely to make a profit. If they don't, they disappear and all the jobs that they provide disappear with it.


In this case (while valid in most arguments) does not hold merit in this situation as they are clearly profitable.


By nolisi on 5/12/2011 5:40:30 PM , Rating: 2
quote:
Remember that businesses exist solely to make a profit. If they don't, they disappear and all the jobs that they provide disappear with it.


Awesome observation. I wholeheartedly agree. The problem you're failing to realize is that when the business starts to fail, it's not a problem with the employees, it's usually an issue with the leadership- you know, the guys who make the decisions in the first place.

You talk about dead weight as if the employees are the only point of dead weight, rather than identifying the failing decision makers as dead weight, why is that? Instead of laying off/replacing or adjusting the pay of the decision makers, whose cost is the same several or even hundreds of employees (in large corporate cases), usually, lower level employees are terminated.

And in that same year that a CEO terminates a bunch of employees, that CEO will still recieve a bonus- a bonus that could cover the salaries of many employees.

Yes, businesses are meant to make money, however, they tend to focus on the welfare of the executive level, even when they're the ones who failed.

I'm not saying employees should be protected at the expense of the business. I'm saying executives shouldn't be protected at the expense of the business either. However, this is what happens, even after execitives really screw up.

You don't think it's mildly ironic to reward an executive with a bonus after dozens or hundreds of employees are laid off and sales have slid (or in extreme cases, after oil is spilled all over the gulf, wasting hundreds of barrels of precious resource)?

The argument of protecting the business to protect jobs becomes invalid when you ignore (and even reward) the root cause of the loss of profit while cutting out the successful portions of your business.


By Arsynic on 5/12/2011 1:28:49 PM , Rating: 3
Looks like they need another cert. They need to make their next round of routers so convoluted that you need a Cisco cert just to turn it on.

Or maybe the fact that enterprises have wised up and realized that if they bought ProCurve switches, they have a life time next day replacement warranty for their equipment and no longer have to pay for a "DumbNet" subscription so Rajiv can remote in and configure your router.




By Lord 666 on 5/12/2011 2:24:41 PM , Rating: 3
I agree with you about the smartnet as the root cause of eroding sales. Not to mention all of the nickel and dime licensing.

Vyatta is also a factor.


By Gzus666 on 5/12/2011 3:21:28 PM , Rating: 2
Yea, they are so convoluted with commands like "ip address x.x.x.x x.x.x.x" and "ip route x.x.x.x x.x.x.x x.x.x.x" or my favorite "show". It isn't Cisco's fault if you don't understand what "Neighbor x.x.x.x remote-as xxxxx" is, it is clear as day to anyone who understands BGP from the STANDARD RFC.

OH GOD, WHY ARE THEY SO HARD. I know it is tough to understand, but for people who work on these all day, CLI is a lot faster than a stupid GUI. I can also script my configs, something I can't do with a GUI.

Best part of course, all of the stuff they implement short of their proprietary protocols are all standard, so I guess you can complain to the standards boards for making it too hard for you.

Most of the certification process is about learning networking, not Cisco's commands. The commands are merely shown to show you how to do the standard method in their environment. You sound like a child who is mad cause he can't work on something. Sorry desktop support/admins, just cause you can work on a Windows box, doesn't mean you can just do networking as well.

Procurve switches are piles of crap, I have had to deal with those and those junky Dell/Netgear abominations in customer environments when I used to work for a partner, what a joke. You would ask them to do anything on their garbage and they would either not know what you were talking about or the equipment wasn't capable.

I wonder why Juniper and Cisco are successful even though both have "convoluted" setups? Probably cause they set it up so qualified individuals work on their equipment and don't give them a bad name.

Maybe we should make all programming languages easier too cause they are convoluted, right? Linux, you are too hard, you need to be easier so idiots can set you up. Screw functionality, just put a bunch of buttons up so I can clicky click.


By Arsynic on 5/13/2011 9:24:25 AM , Rating: 2
Um, what the hell are you ranting about? I'm a CCNA so I'm speaking from experience. Half of the damn exam is Cisco commands and the first half is basically the Network+ exam. Cisco takes industry standards and applies their own convoluted terminology and methods just so they can sell certs.

The same is true of Microsoft...and I have a MCTS.


By Gzus666 on 5/13/2011 9:58:18 AM , Rating: 2
Have any specifics you can reference? A CCNA doesn't exactly qualify you to speak on the certifications, as that is barely an entry level cert.


solution
By Pessimism on 5/12/2011 12:45:11 PM , Rating: 3
They should kill off Linksys. Their products have been a joke for years now and they only serve to further soil Cisco's reputation.




RE: solution
By MrBlastman on 5/12/2011 1:00:18 PM , Rating: 2
There are a couple exceptions in Linksys routers but they are few--the WRT54g is one.

I must admit though, my most recent router purchase was the ASUS RT-N16 (sexy hardware) which I promptly flashed Tomato onto after taking it out of the box. It's been running great ever since.

The real solution to Cisco, I hate to say it, is to get rid of John Chambers. I like the guy, but--whatever happened to accountability? The stock has gone nowhere for years. He's the head guy, his head should roll.


RE: solution
By Lord 666 on 5/12/2011 1:10:29 PM , Rating: 2
Its all about product and technologies. Ever since they brought Warrior on board, things went sour. She was a flop for Motorola and now spoiled Cisco.

I'm not Monday morning armchair quarterbacking here either.


Terrible news
By AssBall on 5/12/2011 12:47:36 PM , Rating: 3
Does this mean that the company expensed private super-yacht tour of the Riviera with Lil Wayne, Bono, and Chef Ramsey catered dinners will be cancelled?

If Cisco is really looking for money, maybe they should look at the $5,000,000 of stock shares their upper managers are payed every year and keep the guys designing, selling, and building routers employed.




RE: Terrible news
By Shig on 5/12/2011 2:30:38 PM , Rating: 2
Article here by WSJ detailing CEO pay going up 11% from 2009 to 2010 year over year. It wasn't just CEO pay either, it was upper management across the board like AssBall has said ^

http://online.wsj.com/article/SB100014240527487039...


Sad news to me....
By Souka on 5/13/2011 1:09:39 PM , Rating: 2
Sad news to me when the company WHO INVENTED the iPhone has to cut jobs...




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