Cisco Job Cuts Buck Trend in IT Sector

July 20, 2011
Company tries to get 'leaner' while industrywide downsizing hits record low.

Despite Cisco Systems Inc.'s announcement earlier this week that the company would lay off 6,500 employees, a new report indicates technology firms are cutting fewer jobs than ever before.

IT companies cut 60% fewer jobs in the first six months of the year than the year-earlier period, according to a report released July 20 by global outplacement firm Challenger, Gray & Christmas Inc.

Cisco's job cut stands as the largest of the year in a sector that is experience record-low downsizing, Challenger, Gray & Christmas reports.

It does not appear that Cisco's decision signals a new trend in the IT industry, says Zeus Kerravala, distinguished research fellow at IT consulting firm the Yankee Group.

"To me it's more Cisco-specific than it is IT-specific," Kerravala says. "I think one of the things that's happened from a market transition standpoint is in networking itself we're starting to see the price points on networking fall, and that's made Cisco get more price competitive."

In addition, Cisco's margins have been declining, so the company made a decision to get "leaner" by cutting its workforce, Kerravala says.

Industrywide, first-half job cuts announced by telecommunications, electronics and computer firms were up slightly from 11,450 job cuts announced in the final six months of 2010, Challenger, Gray & Christmas reports.

But the increase probably does not signal a resurgence in tech-sector downsizing, the firm says.

"The Cisco cuts notwithstanding, the overall health of the technology sector remains very strong," said John A. Challenger, the firm's CEO, in a statement. "In fact, it is one of the best-performing industries in the economy at the moment."

It's unlikely that planned layoffs in the second half of the year will surpass last year's record low 46,825 job cuts, Challenger says.

Cisco's latest cuts likely satisfied any needs for future downsizing activities, says Kerravala.

"I'd be surprised if they do further cuts," Kerravala says. "They're a company if they're going to cut, they're going to cut deep enough that they only do it once."

See also:

Cisco to Cut 6,500 Jobs

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