Hacker News Reader

Comment by _delirium | Hacker News Reader

The explanations given in the article are slightly confusing. Cisco cites a "difficult economic climate", but then the numbers don't show Cisco shrinking or losing money; it's still growing and is quite profitable. So they aren't cutting staff because the business has gotten smaller, or because they have a gaping budget hole that needs to be plugged.

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.

View on HN

Or it could be that the sales team in their biggest market is projecting flat to negative growth. Certainly part of the fallout from the US Government both over reaching on its surveillance mission and nationalistic trolling over security dangers in network equipment, is having a chilling effect on US made networking equipment abroad.

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...

Stocks trade on a multiple of earnings which is generally related to the earnings growth rate of the company. There's a little more to it than that but a benchmark is PE:EarningsGrowth% of 1:1 (20x PE to 20% earnings growth. Yes I know the units are wrong. Investors are not mathemeticians and this is from one of the famous ones.)

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.

Cisco is involved in many different markets. It's entirely possible the division(s) being cut are shrinking and/or losing money, while Cisco as a whole is growing.

That would be item 3

not really.. it's entirely possible the growth areas are just as labor intensive or more so, but those positions require people with entirely different skills than those being laid off.

Yup, exactly. Also, I believe the company is fairly lax in laying people off for poor performance. They may just be doing a little bit of cleaning house.

"1. Cisco overstaffed in anticipation of larger future growth that didn't materialize"

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.

I work for Cisco (for a little while, at least), and my observation is that Cisco primarily obtains staff by acquiring other companies, not through direct hires. It then spends some time digesting each new acquisition, and finally is left with some quantity of people who, even if they were performing a useful function in the original company, now have no real job to do.

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.

My guess turned out to be completely wrong, it's something else entirely

Part of it is their acquisition cycle, whihc has picked up again in 2013. Buy out, consolidate, then look for more. Anyways i've met tech staff who were laid off there and had new jobs with a week.

http://en.wikipedia.org/wiki/List_of_acquisitions_by_Cisco_S...

Alternative suggestion: Its scarily common to see reporting chains that look like this:

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.

I would say neither of them, they overstaffed with the wrong wrong people.

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).

Sometimes large companies do a layoff program to 'trim the fat'. This is about 5% of the total workforce, which is a bit aggressive for that.

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.

Re: atmosphere, I recall reading studies that a certain proportion of people who are both exceptionally good and widely recognized by management as such, and therefore in no real risk of being chosen in a layoff round, nonetheless get very jittery during layoffs, fearing that they'll be next. Iirc two contributors are that some skilled employees massively underrate their own performance, and others just don't trust the layoff-selection process, treating it as an unpredictable and possibly random adversary.

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]".

The old "lets get rid of 5% by next n months" creates a piss poor environment for everyone. I encountered this at one of the first companies I worked for ... I was (tech-wise) young hot stuff. Older people I liked were freaked out. This got me so negative that I left myself after the layoffs. This was around the Y2K tech implosion.

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.

> This reinforces my belief that knowledge capital is very ephemeral in tech.

It depends on what you invest in. Some areas are incredible long lived, like compilers (esp. parsing!), Unix scripting, C, Fortran. Even Cobol.

> Reduced headcount forces automation which might have been politically resisted for years

More like, "we can't afford to spend time on automation now that we lost a team member!"

> 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).

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.

Cisco has been laying off a few percent of their workforce every 6 to 12 months for years. This fits into the strategy they've embarked on since 2007 to move much of the business to india. When you hire people in india you've got to fire them somewhere else.

More on their indian strategy: http://forbesindia.com/printcontent/32858

4. Cover executive compensation increases.

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.

Doesn't Cisco routinely rank people and get rid of the bottom 10%? There are so many layoffs in Cisco over the years. It's no big news.

That's Oracle you are thinking of.

The CEO needs another raise.

Reply on news.ycombinator.com