Cisco to Lay Off Up to 700 Workers, More Layoffs to Come

Not even highly successful IT companies with plenty of cash in the bank are immune from layoffs during this down economy.

Cisco Systems, the world's largest IT networking vendor and the builder of much of the Internet, said July 16 that it is laying off between 600 to 700 employees-about 1 percent of its work force of 66,500-as part of a plan announced in February, a company spokesperson told eWEEK.

Most of the jobs affected are located at the company's vast north San Jose, Calif., headquarters.

Cisco, which has about $6 billion cash and equivalents on hand, is trying to control its costs amid declining sales throughout the entire networking sector.

"The network industry has been flat to down depending on the segment," Zeus Kerravala, analyst for The Yankee Group, told eWEEK. "Still, it's a small number [of layoffs], considering that Cisco has 66,000 employees."

Cisco CEO John Chambers told analysts and journalists on a conference call in February that the company planned to cut 1,000 to 2,000 positions worldwide sometime during the year. At the time, Chambers described it as "a limited restructuring," but he wasn't specific about which sections of the company were going to be affected.

Cisco also wasn't specific July 16 about what kinds of jobs were to be eliminated in this layoff round, nor did it state when the next round of layoffs might take place or when the current pink slips would actually be sent.

In a statement about the layoffs, Cisco said, "This limited restructuring is part of our ongoing, targeted realignment of resources and was previously discussed on our fiscal second- and third-quarter 2009 earnings calls."

"Being very transparent, the definition of a companywide layoff to me is at least 10 percent of your work force," Chambers said on the February call. "While there are no guarantees, we think the odds are reasonable that if we execute effectively as outlined in this call, that we may be able to avoid large downsizing events."

On April 25, Cisco reported a profit of $1.3 billion on sales of $8.2 billion for its fiscal third quarter. Its profit was down a sizable 24 percent from the same quarter the previous year, and overall revenue fell 17 percent. However, Chambers said on the conference call that he thought the decline in customer spending appeared to have leveled off.

Cisco is scheduled to report its fourth-quarter financial results on Aug. 5.