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Cisco Sums It Up: Terminates 8% Of Workforce While Buying Back $1.5 Billion In Stock

Tyler Durden's picture




 

Moments ago Cisco reported a whole lot of numbers as part of its Q4 earnings release. For the most part these were largely irrelevant, but for the pedants out there here is what Wall Street is focusing on: revenue and EPS beats of $12.36 billion ($12.15 billion estimated) and $0.55 ($0.53 estimated) even as Chinese sales continue to crater, plunging 23% in the quarter: thank you NSA.

But the punchline was revealed into the conference call when John Chambers announced CSCO would proceed with another mass layoff, firing 6,000 people or 8% of its workforce.

Putting this number in context, CSCO also announced it had just spent $1.5 billion in the quarter to repurchase 61 million shares of its stock, bringing the total for 2014 to $9.5 billion (including $3.8 billion in dividends).

So, in case there is some confusion, here is a side by side: assuming the terminated 6,000 jobs paid a generous salary of $100,000 per year, that means CSCO, net of restructuring charges of course, just cut down on some $600 million in annual compensation. Truly impressive cost-cutting. And yet, one wonders: if CSCO was indeed so focused on preserving cash and streamlining its operations would it also spend more than double that amount in just one quarter on repurchases.

 

An even more stunning stat: since 2011 Cisco has repurchased $21.9 billion in stock. Since then, it has fired 21,000 people.

Bottom line: terminate the workers, reward the shareholders, courtesy of the Fed's ZIRP policy allowing Cisco to issue debt at virtually zero cost. Thank you Bernanke.

And now, we shift to the Department of Labor, which next week will announce that weekly layoffs dropped to fresh near-decade lows, when by now everyone surely realizes, this is nothing but a pathological, outright lie.

 

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Wed, 08/13/2014 - 18:19 | 5089456 Buckaroo Banzai
Buckaroo Banzai's picture

Giant corporations eating themselves and crapping out employees. It's the 21st century way!

Wed, 08/13/2014 - 18:26 | 5089501 wee-weed up
wee-weed up's picture

Obozo's 6th Annual Summer of Recovery!

Wed, 08/13/2014 - 18:31 | 5089523 SHEEPFUKKER
SHEEPFUKKER's picture

Even the corporate buyback and layoff specialists will be EBT'ing it shortly. 

Wed, 08/13/2014 - 18:35 | 5089542 kliguy38
kliguy38's picture

I'd like to see John Chambers munching a EBT card instead of the carpet in his office

Wed, 08/13/2014 - 18:49 | 5089605 gh0atrider
gh0atrider's picture

Cisco forward gh0atrider's blockchain packets!!

Wed, 08/13/2014 - 20:12 | 5090012 espirit
espirit's picture

Pretty much sums up CapEx for the IT industry.

RIP.

Wed, 08/13/2014 - 20:52 | 5090164 aVileRat
aVileRat's picture

Yeah, expect those gross margins to collapse when BRIC's learn they can get switches & routers from China for 80%, with 100% of the vendor support.

It's going to suck for ALT and IBM when this ripple effect goes upstream. VM ware is just a fraud, 60% of what it claims to do can be hacked by a bunch of drunk 1st year Annon's.

 

 

Wed, 08/13/2014 - 21:08 | 5090212 wee-weed up
wee-weed up's picture

Yep, buy the ones from China with ChiCom hacks built in...
Or ones from the US with NSA hacks built in.

Wed, 08/13/2014 - 19:52 | 5089929 Freddie
Freddie's picture

LOL!   Nobody wants USA-NSA-Obama spy shit hardweird and softwear from Silly Con Valley.  F em!   I bet most of Cisco's employees voted for Obama including all those H1B's.

F Silly Con Valley - F Stanford which has always been a big See Eye Aye hangout along with Cal Tech. F em!

Wed, 08/13/2014 - 20:07 | 5089989 pitz
pitz's picture

It won't be the H-1B's laid off.   It will be the few Americans still left working at Cisco.

Wed, 08/13/2014 - 18:32 | 5089532 Antifaschistische
Antifaschistische's picture

Well, we know the formula.

Even corporations have 1%'ers.  at CSCO it's probably 5%.   But lucrative stock options make keepting the stock price up, a triple top priority.

 

Wed, 08/13/2014 - 18:42 | 5089581 rosiescenario
rosiescenario's picture

...and their Board members, also with options, readily approve it....and the mutual funds which must show quarter to quarter performance are also all for it.

Wed, 08/13/2014 - 18:22 | 5089469 algol_dog
algol_dog's picture

Any wonder why consumers aren't buying anything? How secure can you feel in this world?

Wed, 08/13/2014 - 18:29 | 5089514 Spitzer
Spitzer's picture

This is full bore retard right here boys. The last few headlines ... I mean... This is fuct

Wed, 08/13/2014 - 18:40 | 5089570 Citxmech
Citxmech's picture

The wheels are really starting to come of the cart now, eh?

Wed, 08/13/2014 - 19:16 | 5089725 pods
pods's picture

Sing with me:

"The wheels on the bus have fallen off, fallen off, fallen off.........."

pods

Wed, 08/13/2014 - 19:42 | 5089867 Darksky
Darksky's picture

Theres a hole in the bucket, dear liza dear liza.

(Deleted link to wiki page with full lyrics cuz the link was broken dear henry dear henry)

Wed, 08/13/2014 - 19:55 | 5089946 Buck Johnson
Buck Johnson's picture

They don't feel secure.  And this fake economy is making it seem that everybody is working and if they aren't they are retired etc. etc.. 

Wed, 08/13/2014 - 21:12 | 5090224 Freddie
Freddie's picture

Oddly enough I was checking out some cloud storage reviews on the web.  Some site pimping Drop Box and other US services.

People were posting responses with better and cheaper (many free with 100 G storage) in France, Switzerland, Finland and other places.  People posting stay away from anything in Obama-Ferguson-NSA-Amerika.  No one trusts America anymore.  Scum country filled with TV watching restards.

Wed, 08/13/2014 - 18:24 | 5089474 max2205
max2205's picture

With fringe and overhead, it's about 200,000 or 1.2 billion

I am so glad i am out of corp

What a bunch of Dickheads

Wed, 08/13/2014 - 18:38 | 5089553 BlindMonkey
BlindMonkey's picture

I am in the industry and 100k per head is about as light as the SAN Fran average rent numbers that was posted today.

Wed, 08/13/2014 - 21:12 | 5090230 pitz
pitz's picture

Secretaries and janitors aren't pulling in the 200k, even with the benefits.  In an organization like Cisco/Google/etc., you have a number of these staffers working in support of each engineer or software developer. 

Wed, 08/13/2014 - 23:09 | 5090642 BlindMonkey
BlindMonkey's picture

Cisco pulls in 750k-ish per employee.  The janitors are all on contract.  Can't dilute the numbers with the true peons.

Wed, 08/13/2014 - 20:18 | 5090014 Fred Hayek
Fred Hayek's picture

The actions of american corporations in the last few years will be taught for decades as the flailings of completely corrupt morons.

Professor: Class, today we're going to look at some case studies of businesses in the United States in the late first and early second decades of this millenium, the time leading up to the so called Bankster Crash of 2015. At that time, class, the currency in the United States was issued by a private central bank called, ironically, the Federal Re-

Girl in the front row: But, professor, how can a central bank, if you even have such a thing, be private?

Professor: That's a long story, Katie. It was essentially a scam perpetrated on the public by large private banks and corrupt politicians. But, back to the issue at hand. It was the early 2010's and despite the steady fall of the economy in the United States, the stock market was going up and up to record heights.

Boy in the back: How can that possibly happen? If the economy goes bad stocks as a whole have to go down in ounces.

Professor: Well, there was another sort of scam going on, Steven and, just so you know, at the time, things were priced in dollars, which were just worthless pieces of paper but everyone just agreed to accept them as currency.

Boy in the back: Buddha! Was there anything honest in those days? Professor: Watch your language, Steven. No, there wasn't much that was honest. One of the most dishonest practices was something called stock buy backs. Corporations called I-B-M and Apple-

Girl in the front row: Like the fruit?

Professor: Yes. Corporations would take out loans to buy back shares of their stock from the general public in order to make the ratio of their earnings divided by their shares look better, by lowering the denominator of that fraction.

Boy in the back: But, isn't it the most basic rule of stocks that you should try to buy low and sell high?

Professor: Yes.

Boy in the back: Then why would a corporation do that? And why didn't the rudkowskis tell everybody about it and stop it right there?

Professor: They called them "reporters" in those days, Steven. But the 2010's was an exceptionally dishonest time in our history. There were very few rudkowskis and a lot more men in the media like someone called Jim Cramer who were happy to profit from lying and corruption. Does anyone in the class remember where they've heard the name Jim Cramer?

Girl in the front row(raising hand) In the famous statue on Wall Street that warns brokers what might happen to them, he's the man whose head is on the protester's pike, recreating the famous scene from the Wall Street purging of 2016.

Professor: That's right. Now, class, look at the chart on page 342 and . . .

Wed, 08/13/2014 - 20:40 | 5090121 SteveGennisonBa...
SteveGennisonBallWasher's picture

Right said, Fred.

Wed, 08/13/2014 - 18:23 | 5089476 kchrisc
kchrisc's picture

"I lost my job to a stock-buy-back. Damn stock-buy-backs taking everyone's jobs."

 

An American citizen, not US subject.

Wed, 08/13/2014 - 18:24 | 5089485 Irishcyclist
Irishcyclist's picture

Hollowed Out companies.

I wonder how many more already outsourced jobs will be vapourised as a result of 6,000 direct job losses?

Wed, 08/13/2014 - 18:26 | 5089489 max2205
max2205's picture

News flash IBM layoff all humans

Buys back 100% of stock

Wed, 08/13/2014 - 18:26 | 5089494 scaleindependent
scaleindependent's picture

Automation coming to IT as well. It's funny how ZH pokes fun at fast food workers when they get cut by automation and robots, but then it becomes (at least to me) somewhat indignant when the techies get fired.

Wed, 08/13/2014 - 23:16 | 5090660 Cthonic
Cthonic's picture

Sooner than most people realize. F* it all, you can verify with my twelf in coq.

Wed, 08/13/2014 - 18:26 | 5089497 Dr. Engali
Dr. Engali's picture

6000 future Walmart greeters and part time burger flippers. Welcome to the new America.

Wed, 08/13/2014 - 18:39 | 5089564 BlindMonkey
BlindMonkey's picture

I will be amused to see the H1B guys flipping burgers.

Wed, 08/13/2014 - 20:07 | 5089997 pitz
pitz's picture

Doubt it will be any H-1B's.  This round of layoffs will be just yet another purge of American talent as H-1B's and foreigners take over Cisco and most other quality US STEM jobs. 

Wed, 08/13/2014 - 20:00 | 5089962 Freddie
Freddie's picture

F them and their NSA-Obama spy shitware.  

California is shit.  I bet 75% of Sillycon Valley voted Obama - TWICE!  In California you have the lib assholes in So Cal pushing movie scripts and in Nor Cal they are pushing the next cool app/IPO.   F em!

Wed, 08/13/2014 - 23:59 | 5090763 napper
napper's picture

Well, Obama is merely a puppet. And the tech people didnt have a clue about the real political power structure of the government

Wed, 08/13/2014 - 18:27 | 5089502 Seasmoke
Seasmoke's picture

Send the Fed to the Gas CHAMBERS. 

Wed, 08/13/2014 - 18:37 | 5089551 adr
adr's picture

The gas chamber is rather humane. I'd rather use some good old fashioned medieval torture methods.

 

Wed, 08/13/2014 - 18:40 | 5089568 BlindMonkey
BlindMonkey's picture

Like naked videos of Mr. Yellen playing with a dildo.

Wed, 08/13/2014 - 19:13 | 5089716 stopcpdotcom
stopcpdotcom's picture

(S)he wouldn't make much as a cam girl.

Wed, 08/13/2014 - 19:45 | 5089899 VegasBob
VegasBob's picture

That visual almost made me puke...

Wed, 08/13/2014 - 23:57 | 5090761 napper
napper's picture

That's not torture to Yellen; that's visual torture to the viewers.

Fri, 08/15/2014 - 00:18 | 5095995 BlindMonkey
BlindMonkey's picture

I assure you that was my point.  :)

Wed, 08/13/2014 - 18:43 | 5089505 Gringo Viejo
Gringo Viejo's picture

Gather weapons and ammo. Food and water.
Quit fucking around. It gets worse from here.

Wed, 08/13/2014 - 18:54 | 5089632 Ass. Manager
Ass. Manager's picture

Word!

Wed, 08/13/2014 - 22:08 | 5090443 espirit
espirit's picture

Already have a big screen TV.  What we need is a little trial run disruption so I can snag an APC from the dealership.

Wed, 08/13/2014 - 22:14 | 5090466 espirit
espirit's picture

On the serious side...

Plant some Moringa, identify the Lamb's Quarters and Shepherd's Needle in your yard.

All edible.

Wed, 08/13/2014 - 22:19 | 5090489 espirit
espirit's picture

@ G V

59grains 4350 behind a 150gr. pill will give the 06 a flat shoot to 300yrds.

Wed, 08/13/2014 - 22:50 | 5090571 Gringo Viejo
Gringo Viejo's picture

175 grain....30.06....Remington 760 Gamemaster Scoped.
Molon Labe. Beautiful walnut finish. A shame to have to fire it to protect.

Wed, 08/13/2014 - 19:53 | 5089936 himaroid
himaroid's picture

Huff puff! Hustling to prep. Find time to cruise around rocking and partying wilth old friends a few more times too. This crap will soon wipe the smile off my face. Game face time.

Wed, 08/13/2014 - 18:31 | 5089521 NOTaREALmerican
NOTaREALmerican's picture

This will be a wonderful opportunity for those layed off to improve their skills in order to find another high-paying IT job in the Social Networking Industry.  

Wed, 08/13/2014 - 19:48 | 5089914 DarthVaderMentor
DarthVaderMentor's picture

Sure, you can get screwed and laid off an infinite number of times in the trades......tech is now a trade.

Wed, 08/13/2014 - 18:31 | 5089525 q99x2
q99x2's picture

Can't they sue the NSA and have Yellen print them up a bundle.

Wed, 08/13/2014 - 19:47 | 5089904 DarthVaderMentor
DarthVaderMentor's picture

Hehe....that is sure funy.....LoL

Wed, 08/13/2014 - 18:35 | 5089543 adr
adr's picture

When revenue is fake, you don't need employees to generate it. When the money you use is fabricated out of thin air, you don't need profit to buy back shares.

Running a company is just an excuse to line your pockets with cash, just like a cop shooting someone is an excuse to break into Best Buy to snag a new TV.

The mindset on both sides of the income spectrum is the same.

Wed, 08/13/2014 - 22:33 | 5090538 Spigot
Spigot's picture

At one time DELL made 98% of their profits from front running their own stock. Life was good, then.

Wed, 08/13/2014 - 18:39 | 5089560 Bennie Noakes
Bennie Noakes's picture

How times change. Cisco was the dotcom darling famous for always beating earnings estimates by a penny.

Facebook is now the new Cisco.

Wed, 08/13/2014 - 18:52 | 5089617 22winmag
22winmag's picture

Big Brother Inside!

Wed, 08/13/2014 - 18:55 | 5089628 Big Ben
Big Ben's picture

CSCO shares outstanding have decreased by 420 million since 2011. Cisco's stock price was under $22.50 for most of this period and never exceeded $27. Multiplying 420 million by $25 gives $10.5 billion. Yet CSCO spent $21.9 billion on stock repurchases. What happened to the other $11.4 billion?

Wed, 08/13/2014 - 19:35 | 5089838 Darksky
Darksky's picture

I did the same math but came up with $22b/420m shares = ~$55/share. So i had to look. Last time csco was $55 was for a nano second on its way from ~$90 to ~$8 in the tech bust. This is just insane.

Wed, 08/13/2014 - 22:07 | 5090435 Luckhasit
Luckhasit's picture

This is point in time, where you my friend, are on the list.

Thu, 08/14/2014 - 08:06 | 5091454 Buckaroo Banzai
Buckaroo Banzai's picture

That $11.4 billion went to settle employee stock options. It's management and employees looting the stockholders. If we had sane accounting practices, you wouldn't have to deduce that number as it would be properly accounted for.

Wed, 08/13/2014 - 18:58 | 5089655 ToNYC
ToNYC's picture

Services Deflation. They went DIY-away.

Wed, 08/13/2014 - 19:11 | 5089687 billbengen
billbengen's picture

I wonder what happens when this trend reverses, and companies are forced to re-sell Treasury stock and add employees. The proceeds of stock sales will be required to pay higher employment costs, after managment learns they have cut bone and muscle, not fat. As much as shareholders may be enjoying all the gains now, they must prepare themselves for extraordinary pain down the road. Every pendulum peaks, and then swings the other way. Look out below! Talk about a very mean reversion.

Wed, 08/13/2014 - 19:15 | 5089724 Bunga Bunga
Bunga Bunga's picture

Bullish, buy stocks.

Wed, 08/13/2014 - 19:20 | 5089750 Danno Anderson
Danno Anderson's picture

Try learning the difference between when an employee is fired and when they are laid off.  There's a big difference.  Don't sound like some politically corrected socialist.  

Wed, 08/13/2014 - 19:25 | 5089774 LooseLee
LooseLee's picture

Cisco: poster-child for all that is wrong with 'Capitalism' (err.cronyism?)

Wed, 08/13/2014 - 19:42 | 5089882 venturen
venturen's picture

I can't hear you...I am in my $100 Million mansion in the Hamptons!

Wed, 08/13/2014 - 19:44 | 5089894 Goldilocks
Goldilocks's picture

Starland Vocal Band - Afternoon Delight (1976)
http://www.youtube.com/watch?v=Fz1ex78QeQI (2:56)

Starland Vocal Band - Afternoon Delight
http://www.youtube.com/watch?v=2NUkhMq_iRo (3:34)

Wed, 08/13/2014 - 19:45 | 5089897 DarthVaderMentor
DarthVaderMentor's picture

Between Obama, the Fed, TBTF Banks and Snowden, the American economic engine has been killed, Like an elephant it doesn't know yet it's already dead. The inertia of its moving carcass could take a year before the lamestream press realizes it is dead and gone.

Wed, 08/13/2014 - 19:49 | 5089920 Notsobadwlad
Notsobadwlad's picture

I have a hunch that CEOs think that taking on huge amounts of debt so that they can buy back stock that they gave themselves as unethical compensation (no one else would buy the shares at these high prices) makes them the next "too big to fail".

They will say: "you cannot raise the cost of our debt otherwise we will be forced to lay off 1/2 the work force".

Wed, 08/13/2014 - 19:53 | 5089939 thomasco
thomasco's picture

Many thousands of fired Cisco workers will be out there for decades to come at other companies.  Many will be in positions to make IT buying decisions.  Many of them may recall being dumped by Cisco to pump up its share price and assure generous executive bonuses.

Wed, 08/13/2014 - 20:10 | 5090003 pitz
pitz's picture

Doubtful.  Its mostly Americans that are going to be laid off, and there sure as heck isn't much demand for them in the IT industry.  With most firms hooked on hiring foreign H-1B's instead. 

Wed, 08/13/2014 - 20:26 | 5090076 Freddie
Freddie's picture

True.  Many of these CSCO ex-employees are in for a rude awakening.  Many voted for Hope and Chains.

fewer and fewer companies are buying American Obama-NSA spy shit hardware and software.

Any cloud stuff and hosting will not be with a USA company anymore.  F em.  Too many better and cheaper solutions outside America.

Wed, 08/13/2014 - 23:56 | 5090755 napper
napper's picture

As China and Russia stop relying on American technology products (due to concerns of spyware and national security threats), all big American tech giants will be laying off people by the thousands - IBM, MSFT, HP, Dell, Intel, Norton, etc etc.

 

It's really not the H-1B, it's the NSA, the CIA, in short the rogue elements of the US government.

Wed, 08/13/2014 - 20:10 | 5090004 Freddie
Freddie's picture

Not this time my friend.  Silly CON Valley jumped the shark this time with Obama-NSA and their votes for Obama TWICE.  

People do not need USA shitty spyware tech.  I was looking at Cloud Storage today.  The options outside the USA are cheaper (many free for 100 Gig) and better.  More and more tech is being created outside of Obama's USA.  And it is Obama's USA.

Wed, 08/13/2014 - 19:58 | 5089951 Seize Mars
Seize Mars's picture

The Shit Abyss. The shitabyss.

http://into-the-shit-abyss.ytmnd.com/

Wed, 08/13/2014 - 20:02 | 5089976 razorthin
razorthin's picture

One would think that these terminations will provide the militias ample recruitment prospects.

Wed, 08/13/2014 - 20:06 | 5089987 pitz
pitz's picture

Cisco is a huge H-1B abuser.  So these layoffs probably will be concentrated amongst the remaining US citizen workforce.  Doubtful the economy will get any better until the H-1B visa is abolished.

Wed, 08/13/2014 - 23:49 | 5090741 napper
napper's picture

India will be very upset if you abolish the H-1B visa program.

 

Without foreign technology personnel, CISCO is uncompetitive.

Wed, 08/13/2014 - 20:23 | 5090058 BringOnTheAsteroid
BringOnTheAsteroid's picture

Dear oh dear oh dear. What has happened to this world. There is barely any attempt anymore to hide the greed at the absolute expense of building and adding value to business. The terminal decline is well and truly set in. This is a last ditch attempt by CEO's to ramp their stock prices and extract the last vestiges of cash from their companies.

Wed, 08/13/2014 - 20:24 | 5090065 Dead Man Walking
Dead Man Walking's picture

the way these big tech companies work, something like 80% of their revenue come from their top 20 accounts, for cisco that would be Citigroup, JPM and others like them.  If the banks invested in their own infrastructure, cisco amd msft et al would not have to lay off people, would not have to buy their own stock to make it look like they are selling shit ,and may actually expand, which begins the Virtuous Cycle.  The banks and phone companies are really at the top of the food chain in IT and Tech. Gubbermint too. HHS has an anuual tech budget bigger than most nations gdp. Encourage infrastructure (IT) spending, Bring back the investment tax credit, and much of this gets solved.

Thu, 08/14/2014 - 11:14 | 5090180 RaceToTheBottom
RaceToTheBottom's picture

Financial Engineering.  Americal Executive Management in action.

Wed, 08/13/2014 - 21:23 | 5090270 Caveman93
Caveman93's picture

So, I should go for my CCNA? Is that it? /sarc

Wed, 08/13/2014 - 23:20 | 5090676 Leraconteur
Leraconteur's picture

One million in market cap per job.

Do the math.

Capitol City, here we come!

Thu, 08/14/2014 - 00:06 | 5090768 The_Prisoner
The_Prisoner's picture

Corporations vote in Australia. And a new bill proposes business get 2 votes each in local elections.

http://www.businessinsider.com.au/nsw-government-plans-to-give-business-2-votes-each-in-city-of-sydney-council-elections-2014-8

Australia, leading the world in fascism.

Thu, 08/14/2014 - 04:56 | 5091217 arsenal009
arsenal009's picture

This article would be a lot more credible if they showed us Cisco's change in debt since 2011.

Thu, 08/14/2014 - 07:29 | 5091357 Global Observer
Global Observer's picture

Large companies like Cisco don't lay off employees for lack of money. They do so because of low future expectations of demand for their products and services.

The reasons for stock buybacks are (i) expectation of high inflation/deposit confiscation in the near future (ii) need to prop up their stock values. In the absence of demand for their stocks from the companies themselves, they would have seen huge drop in their stock prices. Buy backs help shore up the stock prices and company valuations. Any profits they are holding as cash can lose value in the event of high inflation in future. Deposit confiscation will mean they will end up with bank stocks instead of cash in their accounts. The less the money that is there for the banks to confiscate, the better.

Thu, 08/14/2014 - 07:41 | 5091387 Last of the Mid...
Last of the Middle Class's picture

God I love the smell of layoffs in the morning! If it weren't for the recovery I'd be worried.

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