Cisco’s Job Cuts

Cisco yesterday announced it an 8% cut to its workforce. Although the company did not say when the layoffs would occur, the suggestion is that some 6,500 workers will find themselves without a job at some point in the future.

Or will they?

The last time the networking giant announced layoffs was August 2013. At that time, it said it would pare 4,000 jobs from its global workforce of 75,049 workers. And just five months earlier, Cisco had indicated it would cut 500 other positions. Yet as of July 2014, the close of its 2014 fiscal year, the company had about 74,000 staffers worldwide. While numbers for its fiscal fourth quarter aren’t yet available, the firm cut just 1,200 jobs through the first three quarters of its fiscal 2014.

Even accounting for open jobs that Cisco may have decided not to fill and offsets from acquisitions, the number of announced layoffs do not seem to match — that is, fall well short of — what Cisco says it will eliminate.

This is a trend.

As of July 2012, Cisco employed 66,639 workers. That month, it said it would cut 1,300 jobs. A year later its headcount had increased by more than 8,400 workers.

Even the last major bloodletting wasn’t as, well, bloody as predicted. In July 2011 Cisco announced it would ax 6,500 jobs, or 9% of its 71,825-man staff. A year later the headcount stood at 5,186 less, a significant number to be sure, but not as bad as what was forecast.

I’m not suggesting Cisco is being intentionally disingenuous about its plans. Certainly many companies respond to predicted downturns with layoffs, and perhaps in most of these cases business has been stronger than what was expected, thus sparing many people the ax. A cynic might say these moves are done less for the actual bottom line and more to pump up the stock price. So be it.  Nor is Cisco alone, for that matter. But it goes to show that job security, even in the volatile tech sector, is likely better than one would think from just reading the headlines.


Litigation: The Next Killer Ap?

Apple v. Samsung.

Cisco v. Tivo.

The EU v. Intel.

The lawsuits are piling up as tech heavies line up against each other and, in some cases, nations or even larger economic blocs.

If you are a market share leader, fending off (or filing) lawsuits is routine.

Apple claimed a victory in the US, where courts have banned Samsung’s Nexus smartphone and Galaxy Tab 10.1 after Apple complained of patent infringement. But Apple’s record on (in?) its home court hasn’t extended abroad. British courts have ruled HTC’s mobile devices did not infringe four of Apple’s touchscreen patents, China courts found for a nearly bankrupt company that claimed ownership of the iPad trademark, and Italian regulators have opened hearings over the company’s failure to meet domestic warranty laws.

As companies sue and countersue over technology that becomes ever more complicated, not only are the courts tied up by the endless legal maneuvering, but company engineers get dragged into the fray as well.

So too, it should be mentioned, do governments. But while the US debates measures that would ramp its anti-counterfeiting laws, Europe is taking the opposite approach. The European Parliament yesterday overwhelmingly rejected adoption of the Anti-Counterfeiting Trade Agreement, siding with critics who claimed the bill put too much power in the hands of bureaucrats. “With companies trying to gain any advantage within a fiercely competitive landscape, an increasingly litigious environment seems to be becoming a reality most companies need to get comfortable with going forward,” opined Sherri Scribner, a senior analyst with Deutsche Bank.

Still, as tech companies rely as much on the courts as the computer to wage their market share wars, one wonders: Will the next generation of engineers be pressed into battle to design products … or defend them?

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Presience, or False Alarm?

“2010 becoming very reminiscent of 2000, where poor inventory control, and concern over long waiting times for leading-edge equipment spelled disaster, and we ended the year with $10 billion in excess IC capacity and a shattered equipment industry that took years to claw out of the red and never fully recovered until this year.”

That’s the comment from the president of The Information Network, a US-based research firm. Is he right?

I tend to disagree. I think the inventory levels are still well in line with historical norms as baselined over the past seven years and well below the glut in 2000-01. Yes, a few big OEMs have invested large sums (a reported $100 million for Cisco) to ensure stock of certain parts, but for almost everyone else inventory is scarce. Lead times for some parts are out to 20 weeks — but Top Tier EMS companies have been upfront with Wall Street about the issue and no one can has been able to cite to me orders lost from an inability to get parts.

Instead, what’s happening is programs are getting pushed out. It doesn’t make anyone happy, but it’s far better than the alternative scenario of excessive inventories and battles over who will pay for them. That itself sets 2010 apart from 2000, in my opinion.

All supply chains have an inevitable tension. Far better for it to be taut than loose.