One day after the latest earnings call by Cisco, it looks like the company is facing some hard economic times and will be adding to the unemployed at a time when the unemployment rate is all too high in the US. This comes from a company who just a few days ago was still hiring employees while everyone else was working to cut costs during the current severe economic downturn. Even though Cisco reported better than expect results in the call yesterday, the general market for their core business of switches for companies is weak and as a result, the competition will increase.
Cisco has relied for years on selling equipment to the government and with continuing reports of budget problems at all levels of government, the sales in that category are going to decline further than they already have. Technology expansion has slowed across all categories for the public sector and when it will return is subjective right now. The private sector is showing signs that it will be performing much better and is currently showing growth for Cisco. With things declining across a number of categories for the future, CEO John Chambers, has talked about cutting costs by $1 billion in order to bring things back into line.
The company has been reportedly doing some recent reorganization work and that will continue as they work to focus on core business functions. They recently shut down the Flip video camera product as it was facing too much competition from mobile phones and the cameras contained in them. That shut down removed 550 positions as a result. With the stated cost cutting, there will be layoffs to be sure. The company has over 73,000 employees with about half working in the US and the big question going around the day after the announcement cuts is how many will be losing their jobs?
Some numbers coming as a result of the call indicate that job losses could be as high as 4,000 jobs. This morning, the general consensus seems to be about 3,000 job eliminations. With the move to focus more on the core business that Cisco is in, there is the expectation that jobs will be eliminated as they move away from non-core business areas though how many that might be cannot be determined. As part of the trimming to reach the $1 billion, the use of contractors will probably be reduced.
Cisco has operations world wide and how spread out the reductions in staff will be is up in the air. One thing that is on the table is the idea of outsourcing some job functions in an effort to save money. Given the history of so many other companies taking that path, Cisco can be expected to move some processes offshore as part of saving money. For the employees of Cisco, this is an unsettling time wondering if you will still have a job when all is said and done.