Iconic Silicon Valley layoff machine tries to stay relevant
Every summer from 2011 through 2014, with icy routine, when Cisco was closing out its fiscal year, it revealed mass job cuts. In July 2011: 6,500 layoffs. In July 2012: 1,300 layoffs. In August 2013: 4,000 layoffs. In August 2014: 6,000 layoffs. A veritable layoff machine.
In the summer last year, with the new guy, Chuck Robbins, getting his feet on the ground, it skipped the layoffs. But the layoffs now being planned are a doozie.
The aging Silicon Valley icon will lay off between 9,000 and 14,000 employees globally, “multiple sources close to the company” told CRN. If it cuts 14,000 people, it would be the largest single layoff announcement it its history. They would amount to nearly 20% of its 73,000 employees.
Many early retirement packages have already been offered to employees, the sources told CRN. The announcement is expected to come within the next few weeks, they said. Cisco will report earnings today after the market closes, and that would be the next opportunity.
Cisco refused to comment when CRN reached out.
The cuts are the result of Cisco’s trying to make the move from its old hardware business – including the big routers for the telcos – to software and services, and to the “cloud.”
“They need different skill sets for the software-defined future than they used to have,” one source familiar with the situation told CRN. “In theory, the addressable market could be higher and margins richer, but it will take some time to make this transition.”
It wasn’t the first rumor about this massive layoff, but the most substantiated. CRN:
Wall Street analyst Trip Chowdhry of Global Equities Research predicted in a January report that Cisco would cut 14,000 employees in 2016. Chowdhry said the cuts would be due to the company not needing as many employees in the back-end process as more customers transition to the cloud as well as Cisco being late to enter the cloud market.
Cisco has been trying to buy its way into the cloud market. Since May 2015, it has acquired at least 10 companies in the cloud/software/internet-of-things sector: Tropo, Piston Cloud Computing, OpenDNS, MaintenanceNet, Mainstream, Acano, Lancope, Jasper Technologies, CliQr Technologies, and CloudLock.
Yet Cisco’s annual revenues and net income have been stagnating for years. In August 2013, it reported annual revenues at $48.6 billion and net income of $10 billion. Two years later, in August 2015, it reported annual revenues of $49.2 billion, and net income of $9 billion. On Wednesday after the market closes, it will likely report fiscal year results that are somewhere in that ballpark, though it may throw in a gigantic write-off to account for the expenses of laying off 20% of its workforce.
Unperturbed by hell or high water, its shares have soared, hitting a high on Monday not seen since the glory days before the Financial Crisis. On Tuesday, it closed at $31.12 a share, having doubled since August 2011. No growth, no problem – in the most wondrous stock market of our era.
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