Cisco Clarifies Layoff Report (CSCO)

There have been many reports today regarding the Thomas Weisel call for more layoffs out of Cisco Systems Inc. (NASDAQ: CSCO), which was never really clear or certain if the layoffs were new or were part of an earlier round of layoffs.  The 1,500 to 2,000 layoffs have been clarified to us by an external Cisco spokesperson.  While it is true that the layoffs have been ongoing and while some workers might still be getting pink slips as a part of this, these layoffs are not a new development and are a part of what has already been telegraphed.

In the most recent call after earnings, we noted that management had indicated that no major layoffs were coming.  But the company spokesperson referred back to a February statement.

“On our fiscal second quarter 2009 earnings call in February we discussed a limited restructuring where we could in the near term see a total reduction of between 1500 and 2000 jobs company wide.  This does not represent a broad-scale layoff in our workforce.”

Broad-scale is something that may feel different to the worker that was just laid off, but the company does list its total headcount at the end of last quarter as 66,558.  So this is far from being one of the old fashioned 10% headcount reductions we used to see.  If the low-end is hit, that would be right at 2.2% of the workforce.  If the high-end is hit, that would represent right at 3% of the workforce.

The layoffs are ongoing and have apparently not been conducted in large sweeping rounds.  The spokesperson noted, “This limited restructuring is part of our ongoing, targeted realignment of resources.  While Cisco constantly manages its business priorities, resources and overall employee alignment as part of our overall business management process, we are sensitive to the impact these decisions have on employees during this challenging economic environment.  We are doing everything possible to minimize the impact on employees affected by the limited restructuring.”

The good news for the company and for analysts is that this is not a  signal of things getting worse.  But the flip-side to this is that there is also not any indication that the company is not going to live up to its goals for its layoff plans.

Jon C. Ogg
July 10, 2009