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Cisco to lay off up to 6,700 staff as outlook deteriorates

Ian Grant

Cisco Systems may cut up to 6,700 staff following CEO John Chambers'forecast that revenue will drop more sharply than expected.

Chambers said yesterday that 2,000 of Cisco's 67,000 would go soon.

He expected sales in the current quarter to fall 15% to 20% compared to the same time last year,up to twice the figure forecast by analysts.

Chambers said economic weakness had spread beyond the US and Europe.

"Being very candid, no one, including us, knows how long it will last," he said.

He said most Cisco customers looked to a recovery in 2010, though Cisco was slightly more optimistic.

Cisco's ordersin January were down 20% on top of an 11% drop in December, suggesting that the slowdown is speeding up.

The company faces a fundamental change in the information and communications market, its chief technology officer, Padmasree Warrior, told Computer Weekly in an exclusive interview.

She said customers are shifting to a "cloud model" of computing based on a virtualised infrastructure. Fewer companies want to own all the computing, storage and network equipment, and even applications, but they wanted choice in what they did and where they did it, she said

This meant that firms would retain control of business critical systems and those that gave competitive advantage, but would seek lowest cost providers for the rest.

The cloud model was still evolving, so customers were reluctant to spend now on non-essential systems, she said. Even when they came back to the market, their budgets would likely be smaller.

Chambers said unless sales improved soon, a lay-off of up to 10% of staff was possible.

Despite Chambers' grim view, Cisco turned in better than expected results for the second quarter.

Net profit fell to $1.5bn from $2.1bn on salesthat slid 7.5% to $9.1bn for the same quarter 2008, the first year-on-year decline since 2003.


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