Faced with declining profits, Cisco is laying off up to 6,000 employees in the months ahead. That’s a whopping 8 percent of the networking giant’s global workforce and comes after Cisco slashed 4,000 jobs last year.
The news came as part of the company’s fourth quarter and fiscal year 2014 earnings. Cisco CEO John Chambers blamed slowing sales in emerging markets and is bracing for the worst.
Cisco’s fourth quarter revenues were $12.36 billion. That’s down slightly from $12.42 billion in the same quarter last year. Net income was $2.25 billion, or 43 cents a share. That’s down from $2.27 billion a year ago.
“I'm pleased with how we are transforming our company over the past several years and that journey continues. We are focused on growth, innovation and talent, especially in the areas of security, center, software, cloud and Internet of everything,” Chambers said. “Our strategy is sound, our financials are strong, and our market leadership is secure. We have the team in place to deliver and are uniquely positioned to help our customers solve their biggest business problems."
We caught up with Zeus Kerravala, a principal analyst at ZK Research, to get his take on the Cisco layoffs. He told us the terminations are somewhat misinterpreted.
“This is more of a reallocation headcount for Cisco,” he said. “Cisco has eliminated some legacy positions in the past to reallocate its jobs into areas of growth. That’s what it looks like Cisco is doing with these layoffs. In fact, I believe 2,000 of the 6,000 are already tagged for InterCloud, which is a big growth area for Cisco.”
Cisco rolled out InterCloud, its new hybrid cloud solution that aims to lower the total cost of cloud services ownership for IT organizations and pave the way for interoperable and highly secure public, private and hybrid clouds, in January.
Part of the Cisco One platform, InterCloud supports hybrid clouds by allowing organizations to combine and move workloads -- including data and applications -- across different public or private clouds as needed, easily and securely, while maintaining associated network and security policies.
Moving Deeper Into Cloud
“Cisco talks a lot about managing through transitions. Managing your employee talent through these technology transitions is equally as important as managing through technology transitions,” Kerravala said. “That’s largely what I see Cisco doing here. Ultimately, there might be a slight reduction in headcount but certainly the idea is a large reallocation into areas of growth.”
Cisco is committed to the cloud. In March, the company announced plans to invest over $1 billion in the next two years into InterCloud. Cisco is architecting InterCloud with the Internet of Things (IoT) in mind. This super network of connected clouds will have the capacity to handle high-value application workloads, real-time analytics, scalability that is nearly infinite, and regulatory compliance with local data laws in countries across the globe.
Cisco has pegged the networked connection of people, data, processes and things, which it calls the Internet of Everything, as a $19 trillion economic opportunity in the next 10 years. This may be part of what is spurring the reallocation of employee resources.
“Talent management is something more companies should be aware of and is an important part of catching market transitions. You may have the right technology but if you don’t have the right people, it’s hard to be successful in those areas,” Kerravala said. “A lot of these areas -- like InterCloud and IoT -- are new and assuring you have the right people as early as possible is a differentiator.”