July 12, 2011, 2:12 PM — And that whole 'networking' thing was going so well
It looks like Cisco is getting ready to take some drastic steps to fix its red-tinged bottom line, by cutting 10,000 jobs worldwide, according to an anonymously sourced story on Bloomberg.
The cuts include 7,000 layoffs and 3,000 workers who took voluntary buyouts the story said.
There should be no reason for Cisco to be in financial trouble, at least in looking at the technological dynamics of the computer business.
There has never been more demand for bandwidth or more promise for a networking company. Virtualization, cloud computing, software-as-a-service mobile computing and every other major trend in technology development favor companies that build fast, secure adaptable networking equipment.
Cisco has been at the top of that pyramid for years – both as vendor to end users and maker of high-volume networking hardware for carriers.
So what's the deal?
Juniper Networks, HP and others are stealing business with cheaper, less complex products, according to Brian Marshall, an analyst at Gleacher & Co. Bloomberg quotes in the story.
It has also been slow to react to drops in both its overall sales and its share of the router and switch markets, he said.
“The revenue trajectory hasn’t been where it should be,” Marshall said. “The company is not staffed on an appropriate level. They simply have too many employees.”
Cisco CEO John Chambers declared an emergency in April, after revenues and share prices dropped drastically, driven by customers shifting away from Cisco or staying with it but switching to lower-cost switches and routers.
Cisco's pricing had put too much responsibility for bringing in the profits on high-end, high-margin products like its Nexus 7000, Catalyst 2960 that became increasingly difficult for end users to justify.
Cisco was slow to respond.
"We have been slow to make decisions, we have had surprises where we should not, and we have lost the accountability that has been a hallmark of our ability to execute consistently for our customers and our shareholders," Chambers wrote in a 1,500-word email to employees dated April 4. "That is unacceptable. And it is exactly what we will attack."