Cisco going in for massive layoffs

By Chidanand Rajghatta

WASHINGTON: Several Western high tech giants with large India operations, including Cisco Systems and Texas Instruments, are going in for massive layoffs in the surest sign that the economic slowdown in the United States is real and hurting.

Cisco, one of the world's largest companies and a showcase for the might of the Indian tech force, on onday joined the long list of companies issuing earning warnings that many fear will presage a recession.

A tech bellwether of monumental proportions, Cisco announced that it would layoff 8500 of its 44,000 staff after a 30 per cent drop in sales in the last quarter. It also forecast a gloomy outlook for the quarter ahead. Some 20 per cent of Cisco's workforce are of Indian-origin.

It isn't immediately clear what fallout the slowdown would have on the company's ambitious India plans drawn up by its CEO John Chambers during a visit only last year. Cisco had announced a $ 150 million investment in India starting with a 500-strong developmental facility in Bangalore, the company's biggest outside the United States.

Meanwhile Texas Instruments, the Dallas chip giant which was the first US company to set up a facility in India, plans to announce 2,000 lay-offs from its 42,000 work force. TI's arrival in Bangalore in the mid-1980s heralded India's high-tech boom and the company maintains a 1000-worker strong facility there.

Also in the pink slip mode is Europe's largest electronics maker Philips, which plans to slash 6,000 to 7,000 jobs, or about 3 percent of its work force, to offset the impact of a slowdown in demand for its products. Philips too recently started what it calls its largest software developmental center in the world in Bangalore employing nearly 1000 engineers and programmers.

Cisco is the world's largest maker of the equipment that runs the Internet and TI makes chips that go into everything from DVDs to cell phones. Flagging capital spending in the telecom sector is hurting Cisco and TI is being decimated by a sharp fall in demand for semi-conductor products because of slowing sales.

At the height of its glory just over a year ago, Cisco was synonymous with the Internet. It grew from a tiny Silicon Valley start-up in the early 1990s to become the world's largest company - bigger than Microsoft and General Electric - in March 2000 when its market captialisation was a staggering $ 560 billion. $10000 invested in Cisco at the start of the decade would have made one a millionaire by the end of the decade.

In part, the success of the company was powered by thousands of Indians who cut their teeth there. Cisco's rise as an Internet star coincided with the huge demand for hi-tech workers, much of which was met by the Indian techie force. At one point, the firm had six vice-presidents of Indian origin and nearly 10,000 Indian employees. It also bought several Indian start-ups in Silicon Valley in an acquisition binge that began in the mid 1990s.

Only last year, Cisco cranked up its India operations after almost a decade of ignoring the country at the expense of China, where it has invested billions. The company opened a newly leased 60,000 sq. ft. Cisco Global Development Center in Bangalore, describing it as its largest R&D facility outside the United States.

It also leased an additional 175,000 sq. ft. to cover planned expansion from 500 people to 1500 including adding a chip design center.

While neither Cisco nor TI have given any indication of whether the slowdown will affect their India operations, it is likely that those plans may remain unaffected. In fact, one reading by industry veterans has been that these companies have been shifting work to the east while downsizing their operations in the west to lower costs.

http://www.timesofindia.com/today/09busu18.htm

-- Martin Thompson (mthom1927@aol.com), May 09, 2001