Net Gear Makers Slash Work Forces

Deep personnel cuts among network gear vendors are taking their toll not only on marketing and administration employees but also on some service and support workers who help users keep their systems running.

And while the cuts are designed to appease nervous investors eyeing the bottom line, they are doing little to calm the jitters of customers, who worry that fewer people and leaner vendors will mean higher prices and less support.

"The vendors are pulling back more and more services to the telcos, and the telcos are pulling back more and more services to their customers," said Ron Ziesemer, a principal at CFIE Group Inc., in Rochester, Ind. "Its dribbling slowly downhill. I assume prices will go up, and services will get worse."

When Lucent Technologies Inc., of Murray Hill, N.J., announced in January that it will cut 16,000 employees from its payroll, officials said the cuts were largely to take place in the back office—administration, marketing and sales—and in some superfluous manufacturing areas. But officials now say some 1,200, or 10 percent, of the companys installation and maintenance workers lost their jobs last week.

The positions became unnecessary mostly because of falling demand from CLECs (competitive local exchange carriers), officials said.

The CLEC industry, whose carriers have tried to move into a market dominated by long-entrenched local telephone companies, is struggling for survival.

"Youve got to be realistic," Lucent spokeswoman Mary Ward said of the technician layoffs. "You cant have people just standing around."

Cisco Systems Inc., of San Jose, Calif., said it will lay off 8,500 employees throughout the organization this year but has not disclosed which departments will be most affected. Employees whose jobs will be eliminated will be notified by the end of the month, officials said.

But even when layoffs are not targeted at customer service, they can affect vendor-customer relationships by stretching manufacturers resources. "From my experience, Cisco has always been very rude," Ziesemer said. "I dont know how long it takes for arrogance to go away."

At the same time they eliminate jobs, vendors are reining in product lines. Cisco and Nortel Networks Ltd., of Brampton, Ontario, in recent weeks have said theyll shed glitzier products acquired and developed in the recent boom to concentrate on essential network gear for essential customers.

Lucent is expected to announce further product discontinuations, called "product rationalization" by the company, when it announces earnings figures this week, according to sources. The product cutbacks, like the layoffs, could mean decreased support for gear already in service.

Nortel, which will lay off 10,000 employees this year, often does not continue to service products once theyve been discontinued.

"The options are that in some cases another company would service those products," said David Chamberlin, a Nortel spokesman. "It may be cheaper."

Working with a new company after a major vendor discontinues a product can be a heavy burden for users, said Ziesemer, who also serves as senior vice president of the National Centrex Users Group.

"What assurances do I have that this new company, which Ive never heard of before, is going to stay in business and is going to support me?" he asked.

At Lucent, when a product is discontinued, the company tries to transition users to new products, according to Ward. "We understand that investment protection is absolutely critical to our customers," she said.