In what is shaping up to be the largest number of layoffs by a Silicon Valley company this year, networking giant Cisco Systems (CSCO) announced on Wednesday it was laying off another 4,000 employees, which amounts to around 5 percent of its global workforce.
The cuts come on top of another 8,000 cuts the company has made over the past two years. While the company is Silicon Valley’s fourth largest corporation in terms of revenue, the company has faced trouble recently due to intense competition in some of its markets and the slowing sluggish global economy which has prompted many companies to scale back planned purchase of its products.
While Cisco CEO John Chambers admitted the San Jose based company’s progress was being hindered by the “challenging and inconsistent” global economy he said the main reason the company was laying off people was to whittle down the layers of people in Cisco’s various divisions, some of which have been slow to respond to recent technological changes.
We just have too much in the middle of the organization,” he said. “We’ve got to speed time to market. Small teams move much faster.”
Cisco has identified areas ripe for expansion as including cyber security, data centers, and video and Internet, or so-called cloud based products and that some of the laid off workers would be rehired for high priority businesses, but he would not say how many.
I’m very pleased with how we are operating,” Chambers said in a conference call with analysts to announce its quarterly earnings, where it reported record sales and an 18 percent jump in profit from a year ago, although its shares fell nearly 10 percent after the earnings report. “I’m very comfortable with our momentum. It’s just not fast enough.”
While the move to lay off workers while reporting record profits may seem a bit of a contradiction, Board Equity Analyst Jason Noland said the move is actually quite understandable and “makes sense generally,” because it is “very important for large companies to innovate quickly, given the landmark changes across IT, and I can appreciate that layer upon layer of management tends to get in the way.”
Chambers said that the company was still in the process of informing the employees of the impending layoffs and said, “the most difficult decision we make as leaders are those that impact our employees.”
Cisco sells switches, routers, servers, security devices, video conference gear and other networking equipment to businesses and government agencies.
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