Recruitment freeze at networking giant Cisco

But Borg like acquisitions will continue

By John Leyden, 15th February 2001

Cisco has implemented a recruitment freeze to cope with a weakening in demand for its products slowing down the networking giant's pace of growth.

John Chambers, Cisco's chief executive, told the BBC that a temporary recruitment freeze has been in place since the beginning of this year, after the networking giant realised that orders were falling well below expectations. He called for a cut in interest rates to stimulate growth in the economy which would encourage firms to invest in IT.

The admission of a recruitment freeze is surprising because Cisco has almost tripled its workforce in the past two years, increasing its head count by 30,000 workers. It is still planning to build a new annex to its San Jose Campus that would allow it to add a further 20,000 more. A recruitment freeze at Cisco would likely have a knock on effect on other firms in Silicon Valley - in terms of both salaries and the job outlook at technology firms, particular those who supply technology or services to Cisco.

Later on in the interview, and in statement seemingly at odds with an ongoing recruitment freeze, Chambers said that Cisco still planned to spend $10 billion this year on acquisitions - but it would be cautious about acquiring firms that employ a large number of people.

According to the Sunday Times' 50 Best Companies to Work For in 2001 survey, Cisco is the best place in the UK to work in. News of a recruitment freeze means nobody will be starting work at Stockley Park (Cisco's modern UK HQ in a grim industrial park near Heathrow) for a while, and existing staffers will have to forgo extra income from the £1 500 recruitment fee Cisco used to dish out. Bad news all round then.

Earlier this month, Cisco announced that it had failed to meet revenue and profit forecasts for its second quarter. A slowdown in the US economy and reorganisation amongst US service providers, a key market for Cisco's high-end routers, have hit its revenues far more than it first predicted, and caused it to predict that revenue for the next two quarters will also be flat.

Excluding costs for acquisitions and other charges, Cisco's second quarter profit was $1.33 billion on sales of $6.75 billion, far short of earlier estimates of $7.13 billion. Cisco's actual net income for the second quarter of fiscal 2001 was $874 million. ®