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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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