On Cisco’s second quarter conference call, CEO John Chambers seemed intent on not doing what nearly every big tech company (except Apple) has done in recent weeks: announce layoffs. But while there has been no across-the-board cut, the company has shed up to 1,000 employees through “realignment and restructuring” efforts over the past six quarters as the company focuses more resources on more promising growth markets. And the company expects 1,500 to 2,000 of its staffers to be similarly dis-employed in this manner in the months ahead.
I do understand the distinction the company is making: realigning people into the best opportunities and cutting jobs in bad businesses is a constructive exercise that helps achieve something over time, rather than simple cost-cutting. “We think of this as Portfolio Management 101,” says Cisco corporate controller Jonathan Chadwick. “While this is very personal and difficult for the people involved, we’re talking about a few hundred jobs per quarter” out of Cisco’s 67,000 person workforce.
The company says it has realigned $500 million in resources over the past few months, and plans to realign another half billion in the months ahead—impressive speed for a company Cisco’s size (evidence that the council-based management approach Chambers is so proud of really is working, even in tough times when hard decisions are necessary). And Cisco management is clearly not looking to layoffs as the cost-cutting measure of first resort. Chambers says the company has already achieved a one-year goal to cut expenses by $1 billion (though some as a result of those job reductions), after just two quarters. One example: travel-related expenses per employees have dropped more than 50%.
And Chambers, thankfully, didn’t hide behind corporate doublespeak as a way of avoiding the topic of layoffs altogether. In fact, he says there may yet be one—and that if there is, it will be sizeable. He has said many times that the hardest thing he’s had to do in his career was the 18% cut the company had to make in 2001, when it was blind-sided by the Net Bust. But he believes companies can more easily weather a single big cutback than a series of smaller ones. “Our definition of a company wide layoff would most likely be at least 10% of the company. But we are not contemplating a layoff at this time.” Unless sales fall much further than the already yawning 15% decline the company expects this quarter, “We may be able to avoid a large downsizing.”
Still, a net loss of as much as 3,000 jobs sure sounds like a layoff to me. Just consider what Microsoft did a few weeks back. Once you factor people Microsoft plans to hire in the next few years, it’s 5,000 person layoff is a net reduction of just 2,000 to 3,000.
NOTE ON UPDATE OF THE HEADLINE: THe headline was originally “Cisco to restructure 3,000 Employees out of jobs.” I am changing the number to 2,000, after a Cisco spokesperson argued that the 1,000 jobs that may have been cut already shouldn’t be included in the headline given its present tense.