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Cisco layoffs cause high anxiety

One year after 10,000 Cisco layoffs, the company has let go another 1,300 employees, and sources say there are only more cuts to come.

Only a month ago at Cisco Live, CEO John Chambers and other executives appeared confident, even triumphant. The...

company was executing a course correction and focusing on core businesses after having fearlessly jettisoned bad bets like the Flip camera and surgically reduced its headcount by 10,000.

But this week, Cisco Systems Inc. acknowledged another 1,300 layoffs, and the move has inspired anything but confidence. In fact, it induced a slew of current and former employees to hit the Internet with complaints of red tape, bloated middle management and cronyism (like those in the comment section of this Brad Reese blog post about the layoffs). One former Cisco employee with deep personal company connections confirmed many of these complaints, and Cisco employee reviews on also echo the sentiment.

The layoffs -- combined with news thatVMware Inc. will acquire network virtualization company Nicira Networks Inc. for $1.2 billion, potentially setting off a rivalry between VMware and Cisco -- could have been key factors in Cisco's stock value dropping 6% this week and hadn't recovered by press time.

And there are more layoffs to come. Cisco has hired a consulting company to direct a "Transformation Project," the former employee told me, and the company is "ranking and stacking" its people, wherein managers are grading team members on a sliding scale. Those who fall into the bottom 5% will get the axe. The layoffs will continue through December, my source said.

Cisco officially is in its quiet period (pending its quarterly earnings report in mid-August), so a comprehensive explanation about current reorganization efforts won't arrive until then. However, there have also been rumors that the company is dissolving its sales and engineering organization for its Wide Area Application Services (WAAS) WAN optimization product line.

Rob Soderbery, senior vice president at Cisco's Enterprise Networking Group, quickly squashed those rumors, telling me via Twitter that WAAS is alive and well. The team that's building and selling the technology doesn't look the same as it did a week ago, however.

"We have made some changes in our go-to-market approach [for WAAS], which has impacted a relatively small number of people and generated a lot of noise," Soderbery said in a subsequent statement emailed to me. "Our engineering teams remain fully engaged and working against our long term roadmap to drive application awareness into the network. To better leverage the capabilities of the teams, I have integrated the WAAS teams directly into our access router group," he said.

My source told me that the overlay sales team for WAAS had been eliminated. That aligns with Soderbery's comments, and it explains why initially there were rumors that WAAS itself was being killed off. WAAS is alive and well, but the organization managing the technology has been reorganized drastically.

Cisco also is laying off employees and revamping in its Cisco Advanced Services, its professional services organization, my source said. In addition, the collaboration organization, a business unit that Chambers has singled out as underperforming, has also seen some cuts, my source added.

The networking industry is undergoing a turbulent wave of unprecedented innovation spurred by virtualization, cloud computing and more recently, software-defined networking. That's apparent in VMware's acquisition of Nicira Networks, a company with software that some say could displace much of the hardware that is Cisco's bread and butter. Meanwhile, rival Juniper Networks Inc. has struck a major partnership and technology licensing deal with Riverbed Technology Inc. for WAN optimization and application delivery controllers. That gives Juniper Networks the ability to attack Cisco on two of its weakest fronts.

Customers need to know that Cisco is innovating. The angst pouring out of the company right now can't be very reassuring. The competition is only getting more intense. Cisco needs to be nimble.

Let us know what you think about the story; email: Shamus McGillicuddy, News Director.

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How are you reacting to the ongoing Cisco reorganization?
If the comments from its employees are correct (inefficient organization), then its reorg should be welcomed news.
Wow this is pretty amazing, considering how Cisco has been the head of the networking pack for a while.
Nepotism is a weakness that kills companies and countries, I won't be paying for the salaries of VP's that are staying because they are someone's budy.
As a stockholder and fan of the earlier company this has been par for the course. Transition Project! It doesn't take rocket science to know a consulting firm will tell a company to cut heads because then they can show an immediate impact to the bottom line (this is always the recommendation). Getting rid of intellectual capital creates a death spiral and sends the wrong message to all stakeholders. It is all about innovation and acquisition for what can't be made in-house. Contrary to an earlier post, Cisco has not been the leader for a while now. All one has to do is check the trend of the stock.
Cisco is stuck in mentality of a decade ago. The look like RIM but with more cash to burn through!
No surprises here
Is Cisco's Set-top box and VoIP business rocking?
Eliminating the bottom 5 percent has been standard annual performance management at Cisco, GE, and plenty of other companies for years. Nothing new there
Cisco has out priced themselves forcing existing customers to look elseware. The "layoff" provides even more reasons.
Sales rep said one thing. Tech support keeps changing. Customers start feeling like something is going on. Upper management never tells the truth on whats going bad. Until it starts effecting their wallets.
Cisco hasn't innovated for the past decade. They are in trouble. I am not buying any gear from them in the next few year.
Cisco is in a death spiral where they decide to cut the "bottom 5 %", which is really a way to cut whomever they want to. They do ratings and rankings of all employees, and then they are told to weight the layoff numbers as per individual executives, who decide where they want the emphasis to be in their own personal span of control. This is where there is no integrity to the layoffs. If a VP in one area decides in favor of one area of focus, say sales and engineering, then the other cross-functions, regardless of skills, expertise, or need, are cut to make up for it. Thus there is really no way to guage the low 5%. It is really a crapshoot. Old folks, chronism, whims, VP buddy system, mecurial VP decisions, and so forth, rule the layoffs at Cisco. They continue to carve away the best in favor of the young and inexperience who make the has been older male executives feel like they are going to get their youth fix from these decisions.
The Cisco partnership with EMC/VMware isn't looking to good right now.

Faked evaluations and rolling "limited restructuring" are opportunistically being used to consolidate control in the business units increasing nepotism. This is the time that old scores are being settled. Family, tribal members, and friends are being rewarded with promotions and bonuses at the expense of the less connected who are responsible for the real achievement.

This is the final nail in the coffin of Cisco's old merit based culture. Cisco has now fully replaced a meritocracy with a kleptocracy imported from the third world. Long term there is no way Cisco can sustain itself as a company with this culture.
Every Company Needs to reinvent itself if it wants to survive the timeline. The change must be handled carefully.
Cisco layoffs means "Cisco is going down" and all customers with it . Be carefull!
Cisco was a good company once. It's now completely corrupted and if you're in management and want to do the right thing, you have to leave and go do it somewhere else--they don't need your kind anymore.
All this is bullshit.
Training for CCNA
Reorganization is the right approach to modernize new technology