Business

Cisco to lay off 4,000 workers; some will blame Snowden

Wednesday, August 14, 2013

There was fallout on Wednesday in Silicon Valley after former NSA contractor Edward Snowden leaked information about high-tech spying. A major Internet hardware company, Cisco, is laying off 4,000 employees. ABC7 News looks at how espionage is going to cut high-tech workers.

The 4,000 layoffs represent about five percent of Cisco's global workforce and many of those 4,000 workers can point the finger of blame at former NSA contractor Edward Snowden.

"Ever since this NSA thing, they've been getting quietly banned in a lot of countries, and I think they're anticipating a major falloff as a result," said tech analyst Rob Enderle.

Enderle says Cisco is battling a perception its Internet servers and routers might have secret codes imbedded to allow the NSA to spy overseas. That kind of speculation can impact sales, fueled by revelations by former contractor Snowden.

"When there were rumors of China doing the same thing, Congress moved to ban much of the Chinese imports and companies in the U.S. starting blocking Chinese sales. Now that the NSA has been found to do this, I think China's saying, 'OK, if you can do it, we can do it too," said Enderle.

This, along with on-going economic weakness in Europe, could be why Cisco wasn't able to meet growth expectations by Wall Street analysts. Cisco reported higher quarterly profits on Wednesday, but with future growth projected to be about two percent lower than expected, Cisco's stock price immediately dropped 10 percent in after-hours trading.

Cisco is not saying where the layoffs will occur. It has almost 17,500 Bay Area employees. The global headcount is 75,000.

The company has a history of layoffs, even as it added 7,500 workers earlier this year. In March, it laid off 500 people. Last summer, layoffs numbered 1,300, while 6,500 lost their jobs in summer of 2011.

Cisco did say the workforce reduction will free up money to spend on what it called "growth opportunities." Cisco has been doing research and development lately on expanding the Internet to vehicles.

It may have a tougher path trying to convince overseas customers it is not a complicit partner in helping U.S. spy agencies.

Cisco would not comment about the NSA issue. It also would not indicate how soon how soon those pink slips would be going out.

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cisco, layoff, NSA, business, david louie
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