As a reminder, Cisco’s latest restructuring really consolidated its headcount and duties. It appears that having a one-stop shop for communications equipment apparently gets so efficient that you can keep doing it with fewer and fewer humans involved. Wednesday just became Employee National Morale Day at all Cisco offices.
Chairman and CEO John Chambers calls the environment challenging and inconsistent, with gross domestic product on a global basis actually ticking down for the calendar year of 2013. The job cuts are aimed at keeping its margins healthy, and this is going to occur via cost cutting and job cuts. Here is what John Chambers said in the press release:
In every case, we exceeded the midpoint of our guidance. We also generated $4 billion in operating cash flow in the quarter, another record. … Now, more than ever, our customers and our partners want Cisco’s help navigating the inconsistent global landscape successfully. They recognize the benefit of a partner who is not only the leader in their product categories, but can bring technologies and solutions together in an architecture to lower operating costs, reduce time to results, and future proof their investments.
Does that sound like a company that is going to announce that 5% of its workers will be fired? It seems like trickle down economics is proving to be true: when pain is being felt at the top, the pain trickles down the ranks of the economy almost immediately.
Layoffs are supposed to be helpful to shareholders when it is simple mathematics of cost cutting and expense management. It is not good if the price for those cost cuts are further disruptions to a company’s business.
Cisco closed up six cents at $26.38, against a 52-week trading range of $16.68 to $26.49. Unfortunately, shares were down just under 10% at $23.89 in the after-hours trading session after the layoff news broke.
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