Cisco to Lay Off 14,000. No Growth, No Problem: Stock at 9-Year High

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.

NeuroMama had no sales in 2012 and 2013, the last two years for which it filed “financial statements,” yet its shares had spiked to where market capitalization reached $35 billion — when the SEC finally suspended trading. Read…  How Can Stock Market Jockeys Be This Stupid?

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  65 comments for “Cisco to Lay Off 14,000. No Growth, No Problem: Stock at 9-Year High

  1. Keith says:

    When it unravels, it will be wondrous.

    • Bix says:

      Last night on Marketwatch I noticed 2 articles
      1. Why the dollar is looking weak…Blamed it in some complete bologny reason I will not bother repeating.
      2.Then in the ticker above I see an article talking about Russia Colombia India Brazil Japan and China selling record US treasuries (2x last year rate) stating yet another complete bolongy reason.

      I’d say they were getting desperate but this was the plan all along…Do you think China and Russia buying gold hand over fist for the last ten years was an accident?? Maybe a Chinese co taking over JPM vault was totally coincidental???

      Sorry people you were sold out…

    • Bix says:

      You can see the meltdown live if you look at USD/YEN and DXY. First they rigged the dollar through treasuries. Then they rigged the Yen through their version of QE….Now that money is tight and theres nothing else to rig, the USD and the YEN are both tick for tick entangled….Only problem is the cabal needs the USD strong AND the Yen weak and that cant happen(cause no one except the BOJ will go short the yen right now)…You can literally see them trying to get one get a rally in one going, and since no one is one board the rally freezes because naturally the other is inverse and moving in the other direction (they dont want to break support on the USD/Yen)…They are the ONLY buyers, the Yen is dead (guaranteed by China’s policy to devalue which caps Yen devaluation strategy) and outside of Nikkei trading hours is bidless…

      • Bix says:

        Sorry that didnt make sense….I dont make sense right now Im half asleep….Maybe this is better..

        By watching the DXY USD/JPY charts, it looks as though someone is using upticks in DXY to respond with upticks in USD/JPY followed by subsequent smackdowns in USD/JPY and then resistance in the DXY….

        So……. It looks to me like someone big is using any buying liquidity in UST’s to dump a blown up YEN carry traded UST bet….this reeks of big player falling out of their yen denomonated bet…Anyway, something to keep an eye on as USD is on a ledge…

        There I hope thats better,

  2. Shawn says:

    Where they use to manage tens of thousands of servers they simply have to replace all that with Amazon, Google, Rackspace or whatever cloud services at a tenth of the cost. They should have figured that out 10 years ago. All those sys admin, db admin, network admin etc people are no longer needed. IT jobs that are customer forward will always be in demand.

    • Chip Javert says:


      Maybe you’re selling cloud services to fair-sized businesses for 1/10th their in-house cost, but nobody else in the industry is doing it.

      “Free” or super-low cost cloud computing as experienced by most consumers (photo-storage, Apple iPhone back-up, etc), simply doesn’t exist for commercial enterprises (excluding marketing come-ons for start-ups).

      There definitely are some cost savings with specific types of cloud services (eg: highly volatile non-critical resource demand), but in 2016, a reasonable sized well-run in-house IT facility can still be cheaper than the cloud.

      We won’t even discuss data security and the effects of processing mission-critical applications off-site over the internet. Third party system admins – yea, that’s the way to save money.

      • jonlaughing says:

        Exactly, Servers are servers are servers. Somebody has to own them, and run them. So if you need a server then it’s simply a question of do we do it ourselves or buy the service from somebody. It’s the same question every business is faced with everything it does. Sometimes it makes sense to do it in-house, sometimes it makes sense to contract it.

  3. BradK says:

    My first thought upon reading this was how many of these reductions (even in “worldwide” staff) will actually result in a net loss? How many will be replaced by on-shore H1-B’s (a-la Disney) or a completely off-shored operation (a-la Symantec)?

    Or is Cisco simply throwing in the towel to Huawei?

    • MC says:

      You know when they say “Great minds think alike”?

      Cisco is throwing the towel in. Huawei has become the top appliant at WIPO (World Intellectual Property Organization) beating Apple, Bosch, Google, Mitsubishi, Siemens, Toyota etc. Cisco Systems hasn’t been anywhere on the WIPO radar for years as (corporate language coming) they focused on growing their cloud business through acquisitions.

      At least for me this is pretty baffling as Cisco has made wheelbarrows of money on those product lines it has been effectively surrendering to the Chinese and, as the Snowden Revelation proved, it had the tacit backing of the US government, very much like Huawei likely has.

      • Meme Imfurst says:

        Did I hear someone say Micron or Apple “it had the tacit backing of the US government, very much like Huawei likely has.”.

        I was, frankly appalled how these tax dodging companies came crying like babies demanding the US government protect their asses from competation. All of them, and while you (USG) are at it, unregulated us too.

        • MC says:

          My remark is chiefly due to the fact buried inside the Snowden Files there was some pretty damning evidence about Cisco Systems’ and other companies’ collaboration with the NSA.
          As the files make clear this was done willingly, with no coercion, it means these corporations got something in return. They didn’t help out of pure patriotism.

          Ironically enough while US citizens and corporations met these news with the usual yawn, the rest of the world, bar full-blown paranoids such as me, reacted with surprise and alarm.
          The Chinese government shrewdly played this card for all it was worth and more: as Cisco Systems saw their Asian sales plummet, Huawei’s literally skyrocketed.

          Now: the Chinese cyberwarfare program (or programs) is truly world class. Differently from the NSA which, possibly as an inheritance of its Cold War mentality, focuses on gathering the largest data volume possible, they have very specific targets in mind and they are exceeding good at getting what they want.
          It wouldn’t be too hard to imagine Huawei is doing fro the Chinese government what Cisco System did for the US one… but I am probably overthinking this.

      • nhz says:

        No price is too high for Cisco shares as long as they provide easy backdoors in their equipment/software for NSA (same story for Google, Facebook, Apple etc. etc. etc.).

        Unlike what is suggested here, Huawei does NOT do this. They gave several big EU network providers with the opportunity to check their router and other hardware/software products including source code in-house. If I had to buy secure equipment I would instantly buy Huawei instead of Cisco just because of this (and probably also because they are in many ways superior nowadays). Huawei know they are under the microscope because of the constant US accusations of being in bed with the Chinese military / government, while US companies seem to get away with anything when it comes to Big Brother technology.

      • Vespa P200E says:

        Cisco in their vain attempt to appease the Chinese all but gave away their trade secrets decades ago to Chinese government who in turn passed it over the Huawei. 60-min did an episode on Huawei and it was damn scary as more US companies are buying cheaper stuff from Huawei who can easily siphon away the sensitive stuff!

        The slow death of once stalwart SillyCON hardware companies continue with Cisco, Intel, HP and acquired Sun to name a few. More pain for the older tech workers and their families…

        The new darling of SillyCON valley is the software biz and time wasting social media BS but the barriers to entry into software are lower than hardware but the CEO/CFO can easily divert the work to India and bring army of H1Bs.

        Alas what about our kids? We are indebting them with fewer jobs other than NS service jobs while allowing Huaweis to overtake our tech biz and offshore the software jobs…

      • Chip Javert says:

        Cisco revenue and GAAP profits have been stagnate for about 5 years.

        Time to build a different better mousetrap. Yield the commodity business to Huawei and move on.

        So Cisco is now doing an “IBM” (or, if you like, an”HP”), moving from relatively low margin IT HW to (hopefully) higher margin IT services (THE CLOUD, for god’s sake!). IBM & HP are still around, but other than that, they have not reclaimed the glory days. House odds are against Cisco doing it either.

        In the mean time, probably 50-70% of their existing management & staff have the wrong skills. Given a 70,000 world-wide headcount, that’s 35-50 thousand people. The 14,000 proposed lay-off only takes care of 25-33% of the re-skill problem. If you don’t solve the rest of it, the company is burdened with huge non-productive labor expense.

        It’s going to be a rough few years for Cisco & their legacy staff.

  4. CrazyCooter says:

    Been horribly busy lately … but, with that caveat …

    If there is anything in technology that I despise more than a tax on orphans, its “the cloud”.

    Please folks, for the love of god, realize that when SOMEONE ELSE owns your data, they will mine it, package it, sell it, and otherwise screw you seven ways to sunday for ever buffalo nickle of profit – and squeeze that buffalo nickle until it s**ts they will.

    The best way I can summarize it is this: NEVER “put in the cloud” core competencies, such as customer data, sales, contracts, revenues, internal financial reports/cost accounting, and other stuff that is otherwise secret sauce to your business.

    DO. NOT. DO. IT.

    If you want to “cloud” non-core stuff, go for it – but these things should be commodity type things you purchase and want the lowest price. The things I said “never put in the cloud” are not commodities you purchase – they are the core business someone else wants to steal from you.

    Know the difference. The cloud will destroy so many companies before it is over folks will wander why CEOs were so damn stupid to go along for the ride. Give it twenty years and it will be text book MBA stuff.



    • BradK says:

      Thanks Cooter, couldn’t agree more. Especially in the post-Snowden world. I do however have no problem storing pics of my cats in the cloud.

      But alas, profit will always triumph privacy just as it does quality, integrity, and longevity. Mega-corps run by pathologically non-technical MBA’s have long thought nothing of replacing secure, American resources and facilities with kids working out of a thatched roof mud hut in a third-world feceshole with electricity generated by a (most sacred) cow on a treadmill in the back 40. If they trust them with their proprietary trade secrets and customer’s intimate data, trust in the cloud seems no great leap.

      Especially when it earns them a fat bonus come the holidays for cutting costs. Hookers and blow, baby.

      [on a side note, don’t you just love how the very same corporations who deny their long-term employees the freedom to telecommute because of “data security” think nothing of replacing him/her with someone across the planet they’ve never seen?]

      And speaking of our old pal Ed, it looks like his former employer hasn’t exactly battened down the hatches either:

      Nothing is safe unless it exists only on optical storage locked in a safe. Remember Tempest?

      • Intosh says:

        Well said.

        Many of the policies in the name of data security is just for show to earn the check in the checkbox from the audit firm, who will gladly dispense that check in exchange of a cheque.

    • MC says:

      I was recently speaking on the matter with a friend who works in R&D for a large German engineering company.
      German corporations still haven’t stopped running around with their hair on fire since Snowden opened his files and it transpired the data used to develop STUXNET was stolen from Siemens with shameful ease. They’ve spent enormous sums of money on data protection and brutally trained their employees handling sensitive data into very precise procedures. And it still isn’t enough: on a average the firewalls around my friend’s facility stop 600 serious attack daily and data miners, keyloggers etc are routinely found in the data system. The sophistication shown by these “hackers” is astonishing: here we are dealing with either well funded and staffed criminal enterprises working for “third parties” (read: competitors) or government-backed organizations.

      The cloud presents a conundrum to these companies. On one side it promises to cut costs, which is music for any corporate type’s ears. On the other everybody knows they can kiss their precious data goodbye in the cloud. So far the prudent types have won and only non-sensible data goes into the cloud: confidential memos, R&D material, “eyes only” studies etc are sent through safe channels. But for how long?
      Like Germany as a whole gave in to the sirens of monetary mayhem, only to find she now guarantees every single piece of euro-denominated debt, her corporations will give in to the sirens of cost cutting only to find their precious data are now used by Chinese competitors to undercut them or Wall Street to play with their stocks like a cat plays with a vole.

      • Meme Imfurst says:

        I don’t mind bring up that so many inventions are US tax payer funded (NASA for example) whose inventions end up in foreign hands at ‘auctions for rights’ because no American companies are interested ( for whatever reason) I give efficient wind generation as a good example, that patent…. went to a German Company.

        And all the cloud storage is a great way to have your secrets disappear and your business undersold.

      • nhz says:

        “The sophistication shown by these “hackers” is astonishing: here we are dealing with either well funded and staffed criminal enterprises working for “third parties” (read: competitors) or government-backed organizations. ”

        I don’t doubt some hackers are backed by governments (with US and Israel way ahead of the rest of the pack), but there are many examples where the most sensitive hacks have been performed by e.g. a 14-year old playing around on its own. The “experts” put far too much trust in their own knowledge and technology and have made us extremely vulnerable.

        It’s appalling how almost everything in my country can be hacked through the internet, including the most vulnerable systems like the transport networks for natural gas, electricity, internet, freshwater, sewage, nuclear power stations, wall and air traffic radar, etc. etc. All very “convenient” until some Stuxnet worm goes berserk (this is an accident waiting to happen …) or someone decides to purposely attack the infrastructure of a country just because they can and think they can get away with it :-(

    • Wolf Richter says:

      I hope EVERYBODY reads your recommendation.

      My rule is: If you put it in the cloud, you no longer own it. You just have access to it.

      • Siege says:

        You may not even have that. Clouds disperse. Storage of and access to the data is dependent upon the entire network of web technology remaining available. If you lose access to the Internet for any reason, no data. In the event of a grid or large scale equipment caused by EMP or CME, no data.

        Would all cloud data survive a Carrington type event? We don’t know, but I’m betting the answer is no.

    • Intosh says:

      It doesn’t matter how much sense your warning is. Fact of the matter is, most CEOs and executives don’t think that far ahead. They look at the expenses, the bottom line and the stock price. Also, you will not believe how clueless most people in the enterprise are about tech and I’m not even talking about the high-level managers — I’m talking about IT professionals. I’ve worked enough with Cisco, Genesys, Avaya and many similar tech fossils to realize many working there don’t know what they are doing. Now, imagine the non-tech companies like banks, insurance companies, etc. We installed and deployed many systems for many customers of that sort and later down the road when issues arise, we receive calls from them and they don’t even know the name of the product, the version nor where it is installed! Despite the fact that, once the project completed and the product delivered, we tell them “now you own those systems, which are running in your data center”, they don’t care. Tech is “hard” and when these companies try to do it themselves, it’s even harder.

      This is inevitable. It just makes sense for the executives and bean counters.

      • BradK says:

        For the shortsightedness of not thinking ahead, this is because execs are incentivized not to. Everything is about this quarter’s and this/ year’s stock performance, not 5 years down the road. That will be someone else’s problem as they’ll be out the door, strapped with a golden parachute.

        Which also relates to your second point where massive tech investments in hardware and software — to the extent there are any these days — are often overseen by an even more revolving door staff than inside the ivory tower. All of a sudden, the entirety of your in-house institutional technical knowledge regarding these investments has disappeared. This is due to technical resources being essentially commoditized.

        • Intosh says:

          In the grand scheme of things, I see the US tech labor market in a pretty sorry state. As you mentioned, there is technical resource commoditization, which creates a vicious circle. There is also the unhealthy concentration of the already rare tech talents into one pole — Silicon Valley — with many there working on social media apps and the like, which inherently don’t create anything tangibly valuable in the long run. Then, you see companies like Apple, IBM and Intel opening R&D campus in China and India (the price to pay for doing business there, which should be expected). (Early this year, it was reported that IBM was undergoing a process of “rebalancing its workforce” that might shed as much as one third of US jobs. Some reports say the new jobs were popping up in China, India, Brazil, Hungary. You get the idea…)

          So for US companies looking for truly qualified tech workers, the worst is still to come.

        • Chip Javert says:


          Two real strong reasons you see IBM & Apple (and others) opening research centers overseas:

          1) for both of them, most of their revenue comes from overseas sales (IBM = 60%; APPL >60%);

          2) With all the bitching & moaning about good jobs going overseas, the US does not produce enough technical talent to meet needs (and no, you generally can’t recycle COBOL coders as modern sys engineers).

          Yea, yea, yea – I know: your brother-in-law Ralph just got replaced by some dude in Singapore, and you know Ralph is the best techie ever. Business has to move where it’s customers are (follow the money; whatever).

    • Michael Fiorillo says:

      Thank you, and beautifully laid out…

      Indeed, why would anyone even consider putting their files in drawers of an immensely wealthy, powerful and data-avaricious stranger?

      • Chip Javert says:

        Indeed. CEO’s should be very carful what they put
        in the drawers of powerful and data-avaricious stranger.

        Sorry; couldn’t resist.

    • Chip Javert says:

      CrazyCooter’s rant is absolutely 100.000% accurate (well, I can’t vouch for his love of orphans).

      It would be interesting to be at the table when “1/10th the cost” Shawn and CrazyCooter discuss cloud computing…

    • Megan says:

      So very true! We have engineers now that only draw clouds on white boards- scary!

  5. Joe says:

    My neighbor is the sale director at Cisco. He just bought a Porsche Carrera.

    • Thomas Malthus says:

      Did the article indicate that Cisco was closing its doors?

      What’s your point?

    • Meme Imfurst says:

      My neighbor was looking for some work, he is a painter. Some lady told him to paint her porch. When he finished and wanted to get paid, he thanked here for the work, and told her the car was a BMW not a porch.

  6. Chris says:

    Flat earnings but soaring stock valuations. To me it is irrelevant whether or not CISCO is shifting its focus to the cloud from hardware. The fact that their stock does not reflect the company’s performance is just another indication among many that the stock market is a fraud buoyed by corporate buy backs. The global economy is a magic show of smoke and mirrors. Please, nobody take notice of that man behind the curtain.

    • Chip Javert says:


      Theoretically, stock prices are driven be NPV of future earnings (different from current earnings). This is forward looking, and therefore, may be subject to, shall we say, wild enthusiasm, for major strategy changes.

      Tech companies are particularly susceptible to both major strategy changes and wild enthusiasm.

      Investors with trivial understanding of markets is why investors like me (retired CFO who does due diligence & can actually read financial statements) make money.

      • Andy says:

        Is this a bubble? I mean Facebook trades at 20 times sales, and $20 Million for each employee.

  7. Uncle Frank says:

    The funds saved by the layoffs will be piled into cash overseas. Cisco will then issue debt to buy back it’s own stock and the price of shares will increase. The process continues until nothing remains other than a skeleton crew of staff, a non-revenue producing corporation and the shareholders. What can go wrong?

  8. robt says:

    I remember an article some years ago about Cisco spending virtually all its profit for 10 years buying back (i.e. mopping up) shares from juicy options exercised by insiders/employees, and never paying a dividend for the whole time, and with the shares disastrously lower than when the program started. This of course was before companies began taking out loans in a big way to buy back shares.
    No wonder share buybacks used to be illegal.
    I love this typical description about buybacks:
    “A way of returning value to shareholders …”
    How does buying back my shares with my own money (i.e. the treasury money), leaving me with no shares and no income ‘return value’ to me?
    If I wanted capital back, I would just sell the shares on the open market.
    The original reason people invested in stocks was to gain income through dividends from the successful operation of a company they invested in.
    But the Wall Street types love it because there’s usually a little blip on the announcement to flip shares before they most often continue on their downward trajectory.

    • Chip Javert says:



      Companies return profit to shareholders (owners) because they cannot effectively invest the money themselves (there are indeed other less-pure motives).

      There are a variety of ways to do this (main ones listed by my preference):

      o dividends (all current shareholders get share of profits)
      o spin-offs (shareholders get cash or shares in spin-off)
      o buybacks (usually done to reduce share count which increases PE; reduce dilution from stock options)

      • robt says:

        Not sure what’s ‘wrong’. As before, under a different topic, you seem to affirm what I state.
        Reducing dilution from stock options is a net-zero benefit. Net reduction of shares beyond the mop-up of optioned shares is moot; share price is not a direct function of shares issued, and PE doesn’t seem relevant any more anyway.

        • Chip Javert says:

          Well, we strongly disagree. I think I’ve been clear that buy-backs are my least favored technique, but it does have value in narrow circumstances (mopping up stock dilution from stock options).

          Regardless of your feelings, the number of shares does indeed effect the stock price. Market cap divided by shares outstanding = stock price. Double shares without changing market cap, and stock price goes down 50%. Proof is left to the reader.

          Now it’s your turn to educate me: SEC rule 10B-18 (stock buy-back safe harbor) has been around since before I was a CFO (this is the rule you want to change, which is ok with me). I am unaware of buybacks ever being illegal – what’s your source for that claim?

        • Chip Javert says:


          The statement “…Reducing dilution from stock options is a net-zero benefit….” is absolutely incorrect.

          Ignoring our disagreement on stock dilution, a stock buy-back reduces corporate equity (just like a dividend). THAT IS MOST DEFINITELY NOT A NET-ZERO BENEFIT.

        • robt says:

          The Securities and Exchange Act of 1934, rule 10b-5 deemed share buybacks (and things like insider trading, and wash trading) as possible prosecutable fraudulent activity, e.g. stock price manipulation. This, and the SEC itself was created because of the notorious activities of such operators as Joe Kennedy, who ironically became the first head of the SEC (‘Set a thief to catch thieves: F D Roosevelt). Just as ironically, he was a good and successful SEC Chairman.
          Rule 10b-18, enacted in 1982, essentially neutralized Rule 10b-5 by allowing stock purchases governed by certain amounts and timing, but in practical terms is not really enforceable except by specific investigation. However the allowances are liberal enough anyway that companies have sufficient room to buy all the shares they could conceivably wish to.
          As to ‘returning profits to shareholders’, I must reiterate that buying my shares with my own money, leaving me potentially with no shares does not return profits to me. It returns some or all of my capital, more or less than I invested. The way to ‘return profits’, i.e. provide income from my investment, and to leave me with shares providing ongoing income, is to pay dividends.
          If I wanted to sell shares, I’d just enter a sell order.

  9. Ethan in VA says:

    I work in the data center world. It’s mostly Juniper for routing, Arista for switches. You still see Cisco stuff here and there, but it’s mostly legacy stuff that people haven’t bothered to upgrade.

  10. Ehawk says:

    Is this a Rumor or is it confirmed ?

    • Wolf Richter says:

      A leak by insiders. Perhaps on purpose in order to avoid surprising the markets. Cisco refused to confirm it when CRN reached out – but didn’t deny it either.

  11. Ptb says:

    Chambers got away with murder. No growth for most of his tenure and he was aloud to get filthy rich from it

    • Chip Javert says:


      So Chambers delivered over $18B in retained earnings during his tenure and 9%+ average annual growth for last 15 years and he got away with murder?

      Like to hear your prescription for doing better with a start-up company, especially since you apparently didn’t even do 3 minutes of Yahoo Finance research before making your comment.

  12. Ehawk says:

    Well, well. Somebody please enlighten me.

    I though the low interest rates by the Fed were suppose to help companies to create jobs and growth in the economy… right? It seems like these rates are only good for companies to get loans on the cheap to buyback their own stock at the same time as they layoff employees because it saves money and there’s no growth…

    Why isn’t the practice of buybacks prohibited? it’s fraud.

    • chip javert says:


      Share buy-backs are a perfectly legal and legitimate way to return profits to shareholders.

      Calling it fraud is uninformed; you need to understand it better (and I think we’ll agree some shady practices could be eliminated):

      Buy-backs are very useful for reducing outstanding numbers of shares, thus increasing PE (share price divided by share’s portion of earnings). With less shares and less earnings, it is mathematically possible to legitimately have a higher stock price.

      Buy-backs are also used to reduce the effect of dilution (esp. from stock options).

      I DO ABSOLUTELY AGREE WITH YOU THAT NET BORROWING (more borrowing than profits) SHOULD BE HIGHLY RESTRICTED (there maybe some obscure circumstance I’m unaware of when this is a reasonable strategy).

    • Chicken says:

      Yes, the FED is par none when it comes to enabling fraud. These “academics” are well paid for their opinions.

  13. michael says:

    If you are a CEO or executive faced with stagnating growth and over supply in the global market what are you going to do? Innovate, Invest in more oversupply, or buy back your own stock with low interest rate borrowed money.

    Buying your own stock back is a safe is less risky. Besides few of the top executives in my company stay long enough to be held accountable anyway.

    • Chip Javert says:


      At all times, shareholders (not managers) own corporate profits. Managers exist to use the funds to generate acceptable returns. If, for what ever reason, this is not possible, the money should be returned to the shareholders. Nothing wrong with that.

      o Apple has not paid dividends and has amassed a cash pile of tens of billions – if you trust Tim Cook to make acceptable returns on driverless cars, you are happy; if not (I’m a doubter), you’d prefer a dividend.

      o Berkshire Hathaway does not pay dividends, and also has tens of billions on the balance sheet; however, most investors absolutely trust Warren Buffet to invest this to generate acceptable returns AND DO NOT WANT A DIVIDEND (the risk here is Buffet’s age).

  14. michael says:

    Actually I think this might be the canary in the coal mine. I think Cisco did the same thing right before the last downturn?

  15. Ehawk says:

    CISCO is the typical company that had its glory days in the past two decades, but….. technology moves on and it’s almost impossible for a Tech company to have a successful second act. Cisco is trying to get a slice of software and cloud-based tools for data centers, but its miles behidn int the field that is crowded with topDOG, Amazon AWS is the clear leader, Microsoft is second and then every legacy Tech Company is from Google to IBM trying to get it. Cisco a hardware and networking company does not have any advantages and networking expertise does not help it to get new growth… Even they keep buying cloud startups

    • Chip Javert says:

      A+. Exactly right.

      Cisco currently has about $19B in retained earnings – if Cisco struggles over the next few years, this capital could be substantially destroyed.

    • Jonathan says:

      Networking hardware is already a commoditized business; anybody can take an off the shelf ARM CPU, build a switch/router around it and sell it at a fraction of the price that Cisco wants to charge. These things are far, far less sophisticated than the PCs they are connected to.

  16. TheBallAlwaysKeepsMoving says:

    I read an article –sorry, no reference– that FaceBook’s MZ had made the decision to ‘open-source’ a large body of their infrastructure’s hardware designs.

    It claimed that Amazon had been one of the first adopters and the other companies like Google and Microsoft were watching closely.

    It said that they were tired of pricey electrical engineers running the company. –No disrespect intended to EE’s, that stuffs hard!– They went out on a limb to say that a discussion within FB likened the move to the open-source movement decades ago ‘IF’ it took hold and made the reference to Amazon’s large adoption to promote that it had an excellent chance due to the fact that MZ had invested large amounts in system’s design and refinement!

    The bottom line was that one of the biggest losers if the move panned out would be companies like CISCO!

    Guess we’ll see…

  17. Lune says:

    2 observations:

    1) IMHO, this move to the cloud is an admission of failure by U.S. managers that they can’t manage one of their business’s core operations. The only area where the cloud should have an intrinsic price advantage is for marginal compute capacity, i.e. the part of your computing needs that fluctuate wildly. For example, if you run research analytics on a large data warehouse on an irregular basis and you need to spin up a massive amount of compute power for a few days to complete it.

    (The other use is for small capital-constrained entities like startups that would rather spend their money on product development and can’t afford a large initial capital expenditure, or are small enough that Amazon can provide true economies-of-scale).

    For the rest, for the 90% of your IT infrastructure that is predictable and stable day-in, day-out, there is no intrinsic reason why Amazon should be more efficient at managing it than you are, unless you’re a bad manager. Selling off your hardware and firing your IT staff may give a one-time boost to your earnings but you’ll pay for it in the drip-drip of monthly profits you pay Amazon to do your job for you.

    And this is even before the very real questions of data security, ownership, etc. are considered.

    (FWIW, IMHO, the only company that does cloud computing right is Netflix, which runs entirely on Amazon, despite being so huge themselves. And the only reason it works for them is because they focus laser-like on optimizing their Amazon infrastructure and managing it basically like their own, just without the capital investment. I’ve seen blog entries by their engineers drilling down to low-level system calls on their Amazon servers and figuring out how to restructure their server instances to improve them).

    2) Hardware companies moving into software have a severe case of grass-is-greener syndrome. Let’s see: you’re the dominant router mfg’er for the entire world, with a large captive consumer base and massive barriers to entry in the form of patents, name recognition, legacy vendor lock-in, and the need for any competitor to build their own factory, but you’re losing in that space, so you want to give all those advantages and compete in a commodity arena where prices are decreasing faster than in the hardware space? Yeah, sounds like a great strategy.

    If Cisco lost the router market, what makes them think they’ll compete in the cloud market? It’s instructive that Amazon, Facebook, and Google, who should be three of Cisco’s biggest customers, have decided to build their own routers for their network infrastructure. It means Cisco sucks at building routers now, and that their routers are not cost competitive for building a big cloud. So what is their competitive advantage? Unless Cisco is planning on buying routers from Amazon, this sounds like a prescription for a future $10 billion write off…

    At any rate, the computer industry moves in cycles. Cloud computing in the ’10s = Client / server in the 90’s = dumb terminals in the 70s. Indeed, IBM is touting its mainframes as great cloud machines. Once a major cloud vendor goes belly up and takes all their customer’s data and compute facilities with them, the pendulum will swing once again.

  18. JOSEPH P. says:

    Cisco Systems, Inc., a giant tech company, plans on laying off 5,500 employees or about 7% of its global workforce starting in the next few weeks. The Cisco company has been a champion for increasing H-1B visas and is currently the 28th biggest user of H-1Bs in the U.S.

    The Cisco layoffs are just the newest in a growing national trend by many technology companies, such as Disney and Abbot Laboratories, to use visas like the H-1B visa to import cheaper labor instead of hiring American workers. In some cases, the employees were forced to train their replacements in order to receive their severance pay.

    A 2011 study by the U.S. Government Accountability Office exposed how the H-1B visa was being exploited and showed that there was very little oversight of the program. According to the report the government doesn’t even know how many workers are actually in the U.S. on H-1B visas at any given time.

    The Cisco company has a history of laying off employees at the end of the fiscal year. They laid off 6,000 workers in 2014, 4,000 in 2013, and 6,500 in 2011. Yet, the company continues to apply for more H-1B visa workers and Cisco executive chairman and former CEO, John Chambers, has been a major backer of the tech industry efforts to persuade Congress to increase the national quota of H-1B visas.

    Chambers was a supporter of the I-Squared Act that would have tripled the number of H-1B visas fro 65,000 to over 195,000. In a 2015 interview Chambers said that the tech industry needs to distance itself from the mass immigration interview and focus on increasing H-1Bs. “Part of the reason we’re not getting through is that it’s being held hostage to a larger immigration bill,” Chambers said.

    • Former Cisco Guy says:

      Yeah, funny my boss told me like 2months ago that I had to train these guys from “GS Labs” to do our jobs…he said he was going to transition into another role.
      I asked, “Where is my career path here?”
      He said, “I don’t know.” (with a dumbass grin on his face.

      Well, he got his…he was dumped too…there ya go…

  19. Old(er) Hippie says:

    Bucky was right.
    “All the real talent (which also means integrity) gets siphoned off into the Arts and Sciences, and that leaves the dregs to put it all together.”

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