The plan by Cisco to cut 10,000 jobs will hurt it more and could push it further to the path of inability to revive growth. First, by losing about 14% of its manpower, Cisco could be out-innovated by its peers in the market. One thing Cisco needs is to jumpstart innovation and bring more products to the market. Unfortunately, it has chosen the other way and went for job cuts. Recall that this company cut 550 jobs in May when it shutdown Flip video camera unit.
About 7,000 people will go by the end of August. Already as we noted before that 3,000 people have accepted buyouts.
You lose 10,000 folks, where are you going to make up the coverage in R&D and sales. The challenge is not just boosting earnings in the next quarterly earnings, but sustaining its over the next few cycles. The reduction of manpower will surely help, but that may not change the tide.
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The once innovative Cisco has been badly out-competed. Huawei has taken all the major contracts in Africa and Cisco has none. In enterprise business in the developed world, Juniper and HP have broken Cisco apart. Cisco could not find favor in the customer market with the camera Flip which it bought in excess of $500m and cloded. This company is in a pitiable state.
The key problem is Juniper Networks and HP. They have eaten into Cisco core switches and router business. Even Huawei is also causing havoc with its low prices.
For Tekedia, this is what we think will happen: Cisco could trim its number of African dealers or partners. We think the companies that depend on Cisco for bulk of their revenue must be vigilant. They must adapt and be ready to enter into new areas. They must see this job cuts as a deep sign that not all is well in Cisco and it is time they make have a Plan B.