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Cisco layoffs this week part of 'Transformation Project'

Jim Duffy | July 25, 2012
Cisco's layoffs this week could be the first in a series of cutbacks hitting product lines and business units that have underperformed.

WAAS revenue declined sequentially for Cisco in Q1 as it did for every major vendor in the market, Dell'Oro noted. But Cisco's WAAS revenue is at or below the level it was in Q2 2010 while Riverbed's has grown roughly 30% since then, according to Dell'Oro figures.

Also, Cisco a year ago combined WAAS's standalone business unit -- the Application Delivery Business Unit -- into its Services Routing Technology Group, which may have necessitated this week's restructuring to eliminate redundancies.

Yet Cisco says it remains committed to WAAS and has no current plans to discontinue the product.

"Speculation that Cisco has dissolved the WAAS business is inaccurate," a company spokesperson said. "Our plan to deliver it pervasively as part of the WAN infrastructure remains unchanged."

The collaboration technologies business was a disappointment during Cisco's fiscal Q3, which ended in late April. Sales were flat due to market dynamics and lack of execution. TelePresence specifically, a key piece of Cisco's collaboration strategy, was hit by decreased spending in public sector and enterprise.

CEO John Chambers, during the recent Cisco Live conference, more than once referred to the need for Cisco to improve its collaboration execution, including the need for more operational consolidation.

"We did not agree as crisply as we should have on strategy, what was our architecture to get there, and then what is our multiple phase road map to get there," Chambers said at the time. "You'll see us go back to the basics and consolidate collaboration under one group and prioritize what we want to do or not."

These proclamations came shortly after Cisco killed its Cius collaboration tablet computer only two months after it began shipping.

In Advanced Services, Cisco may just have simply overshot the market. Every product announcement was accompanied by a related array of new services offerings. And in the face of cautious spending and global economic challenges, if customers are not buying products they most likely are not buying the services to integrate them.

Linksys continues to wear the consumer albatross at Cisco. Cisco all but gutted its consumer operations last year amid disappointing sales and integration and execution strategies. It killed two highly visible products after splashy introductions, laid off 550 people in that unit alone, yet pledged to stick by Linksys and make it a more integral and profitable component of its core strategy.

And then Cisco experienced the Linksys cloud snafu of two weeks ago in which it forced a firmware upgrade on users of its EA line of routers, held them in a Cisco Connect Cloud configuration service, and said it would monitor customer activity to uphold service terms and conditions.

This week's layoffs may be the chicken coming home to roost for that Linksys strategy error.

 

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