Monday, September 12, 2011

Cisco paved the way for a long hot summer

The weather hasn't been all that warm in the Bay area this spring and summer, but the business press has been hot, Hot, HOT. Especially with the stories 'behind the stories'. Cisco downsizing, HP/Oracle suing and countersuing, Apple/Google suing and countersuing, Oracle and Google suing and countersuing, HP announcing with great fanfare and then withdrawing in even bigger fanfare, Jobs resigning and Carol Bartz detonating. Big stuff. Too much to digest?

Like, for instance, Cisco's 'blockbuster announcement' in mid-April about a possible 're-alignment', shifting from twenty-two "primary initiatives" back to "our main business". And then describing that this 'might' result in laying off 6,500 jobs. The business press treated it like a bombshell, but the number was disguised beautifully. First of all, it ignored the 5,000 folk with Fibercore and the Set-Top Box business who were 'sold', and it ignored the 500 folk with Flip-cam, jettisoned the day before they were scheduled to release their next great product. You'd think that with the top product in the world, you'd at least try to sell the division rather than just cancel it.

These moves get Cisco to 12,000 jobs 'lost' rather than 6,500. Then, some 3,000 were announced as 'taking the retirement or severance package' while another 2,800 declined such an offer. In spring 2011, estimates were that Cisco had 73,000 regulars (losing 15,000 by the count we've just listed, though the company later insisted that the 'retirees' were among the 6,500), and perhaps 25,000 'temporary workers' (plus or minus 15,000 or so).

Then, some unacknowledged number of 'temporary workers' were cut adrift, but the company would not comment on this one. The last time, in 2001, the numbers were staggering in the 'temporary ranks' -- then Cisco reportedly had 40,000 'regular' workers and 4,000 temporary. And 3,000/5,000 of the 'regulars' were let go, while 2,500 of the temps were dismissed. Estimates are that forty percent or more of the temps (vs. 60% ten years ago) were shown the door this time around. One key division reputedly had 75% of its 'staff' as 'temps' -- all of whom were dismissed.

All told, these frankly speculative numbers would put the real downsizing at 22,000 to 25,000 people, out of a total workforce of 98,000. That's BIG by any standard.

Why the secrecy re the 'temps'? Well, there are several reasons. First, this is a category that gets lots of Washington DC scrutiny after all the claims and issues around 'body shops' and cheap foreign labor and H1B visas. Books are now coming out describing some of the disgraceful practices, taking advantage of foreign nationals who have studied in America (50% of America's Masters degrees and 70% of PhDs granted in electrical engineering are to foreign nationals these days) and want to stay, or prospective graduate students who use jobs here as an entree.

Second, these jobs are by definition, and by law, restricted to "less than one year" in order to avoid the company having to provide health benefits and government wage taxes, costs that increase the labor cost to the company by up to one-third of the salary (but which tend to build longer-term loyalty as well as carry the fair share of the infrastructure cost of running our country). Anecdotal evidence, though, is that the average 'temporary' worker being let go at Cisco (just like most of the other Valley companies who use this same practice) has done the same job for an average of three and a half years -- the contracting 'job shop' just rejuggled the job title and description once a year. Patently illegal, but perfectly 'normal' in the Valley these days according to my sources.

And then, the rumor mill floated that Cisco's enormous push into 'the consumer space' with Linksys and the Scientific Atlanta acquisitions, as well as Webex and Tandberg for conferencing services, might be killed as well. The Tandberg folk we interviewed cheered this news mightily, but to date it is just rumor. When HP shot its own versions of teleconferencing a month later (June 1, 2011), the question became "does Cisco REALLY make money on these big Telepresence rooms? or do they give them to their biggest IT-shop clients to sweeten the router/fiber usage bundle?"

If all of this effort ebbs, it would be a shame, I think, for these are in fact game-changer technologies, just not particularly well executed as yet (little things like eye-contact sucks on the edge seats, because they save the cost of two extra cameras in a half-million dollar system).

All told, an interesting time at a company that has long been a bellwether in the Valley, both for a great place to work, and a progressive set of ideas for the market

1 comment:

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