Leading Tech Company Posts Records for Earnings and Revenue – Lays Off 5% of Workforce

corporate-greedTrickle-down economics strikes yet again.  In a perfect example of just how much of a scam this economic theory really is, Cisco Systems, a leading tech company, posted record fourth-quarter profits in both earnings and revenue.

How much you ask?  Well, $2.3 billion in earnings and $12.4 in revenue.  Again, both records for the company and on par with their estimates.  Oh, and a 6 percent increase over last year during the same quarter.

So, how does Cisco plan to reward their workforce after posting records in both earnings and revenue?  Raises?  Bonuses?  Various work perks?

No, they went a different route.  Permanent unpaid vacations for 4,000 of their employees—or 5% of their global workforce.

You see, just after posting records in both earnings and revenue the CEO of Cisco, John Chambers, announced that “to meet next year’s numbers” they would be laying off 4,000 employees.

But don’t worry, I’m sure Mr. Chambers and other executives will be receiving a nice big raise and bonus for posting these records.  And it’s behavior like this which shows why trickle-down economics is a complete fraud.

Doubt me?  Then don’t listen to me, just look at what the CEO said.  To meet next year’s numbers they would eliminate jobs.  See, record-breaking profits like this year’s aren’t good enough, they need to grow profits.  And sure, you can grow profits by assuming more business, but the safe bet is to eliminate expenses.  In this case, 4,000 of them.

While I’m almost certain executives like Mr. Chambers are reaping the windfall of these record numbers, 4,000 Cisco employees will be unemployed very soon just so their stock options and bonuses will continue to increase.

They’re not “trickling down” anything.  And even if some lower-level or mid-level employees do see a bump in pay, it didn’t come from better profits—it came at the expense of another person’s job.

And just to throw this out there, this is a company that has a revenue for 2013 of $48.6 billion and earnings of just over $10 billion.  While they announced these layoffs, they also stated that they will continue to push towards being the worlds #1 IT company.

So ponder this — the company wants to continue to push forward to become the “worlds #1 IT company,” yet it’s laying off 5% of its workforce.  Who’s going to cover that workload?  Oh, that’s right, the employees they don’t layoff will just be given an even larger burden to deal with at work.

This is the kind of stuff which ticks people off.  If a company is losing money, or struggling, and they announce layoffs that’s one thing — and usually expected.  But when a company posts record revenue and earnings, then announces the layoff of 5% of its workforce, that tends to make people a little angry.

See, most people don’t care about how much these people make.  What people do care about is when the wealth of these people, or businesses, is grown at the expense of their jobs, their pay and their benefits.

So spare me this talk of how “trickle-down economics” is our only path to economic success.

It’s a con, it’s a scam and it was created by the rich to continue to build their wealth on the backs of everyone else.

Allen Clifton

Allen Clifton is a native Texan who now lives in the Austin area. He has a degree in Political Science from Sam Houston State University. Allen is a co-founder of Forward Progressives and creator of the popular Right Off A Cliff column and Facebook page. Be sure to follow Allen on Twitter and Facebook, and subscribe to his channel on YouTube as well.

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  • Nicholas A Kocal

    This is why a higher top marginal tax rate is needed. And when something else comes along Cisco will die off the way of the dodo as the C level executives will continue to steal from the employees and not re-invest in the company.

    • Charles Vincent

      Taxing the rich to help the poor or to pay down debt doesn’t work there are not enough rich to carry the burden. And even when the marginal tax rate was 90% after deductions people only paid 50%(they pay 39% currently) in taxes and if you look at how their income would be they would make less than the average lower middle class which is ~37,000 dollars a year.

      • Nicholas A Kocal

        Actually it works quite well as when the marginal rate goes above 50% the stealing CEOs decide to take less pay and re-invest it in the company, paying higher salaries to the people making the company successful, making capital investments, providing training, etc. All of which benefit the economy and remove the need for people to use government services.

        And it also eliminates the Boom/Bust cycles in the market because the CEO and other C level officers start to make long term decisions and investments as opposed to looking how to make the most money in the shortest amount of time.

        Or at least this is what history shows.

      • Charles Vincent

        “Actually it works quite well as when the marginal rate goes above 50% the stealing CEOs decide to take less pay and re-invest it in the company, paying higher salaries to the people making the company successful, making capital investments, providing training, etc. All of which benefit the economy and remove the need for people to use government services.”

        If this assertion is true post the relevant data Instead of just eluding to it.

        “And it also eliminates the Boom/Bust cycles in the market because the CEO and other C level officers start to make long term decisions and investments as opposed to looking how to make the most money in the shortest amount of time.
        Or at least this is what history shows.”

        I don’t think this is an accurate statement. I have never seen any data long term or otherwise that shows this to be true.

      • Nicholas A Kocal

        Sorry but do your own research. I have found that the ignorant will always have an excuse for not believing the facts.

        But if you want a hint, look at the stock market from the end of the great depression to when President Reagan said that greed was good and got the top marginal rate lowered. You will not find any booms or busts in any of the time.

      • Charles Vincent

        I have and it doesn’t back what your asserting.

        “After 1945, recessions not only were more frequent; they were steeper. There were recessions in 1945, 1949, 1953, 1957, and 1960 (1957 having a deeper two-quarter decline than seen in our Great Recession), before finally a nine-year run came sans recessions.

        But then stagflation came, with double-dip recessions in 1969-70, 1973-75, and 1980-82. Against conventional metrics, it still remains questionable to say that the Great Recession was worse than what hit in 1973-75 and 1980-82. The president seems bent on this interpretation, given his penchant for saying ours is the worst economic crisis since the Great Depression. The only thing we can be sure of is that the recovery since 2009 has been worse than the recoveries from every one of the various recessions listed above.”
        Courtesy of John Taylor economist Stanford university.

        Here is a history of surpluses and debts from the start of our country.

        “Except for about a year during 1835–1836, the United States has continuously held a public debt since the US Constitution legally went into effect on March 4, 1789. Debts incurred during the American Revolutionary War and under the Articles of Confederation amounted to $75,463,476.52 on January 1, 1791. From 1796 to 1811 there were 14 budget surpluses and 2 deficits. There was a sharp increase in the debt as a result of the War of 1812. In the 20 years following that war, there were 18 surpluses. The United States actually paid off its debt entirely in January 1835, only to begin accruing debt anew by 1836 (the debt on January 1, 1836 was $37,000).[2][3]
        Another sharp increase in the debt occurred as a result of the Civil War. The debt was just $65 million in 1860, but passed $1 billion in 1863 and reached $2.7 billion by the end of the war. During the following 47 years, there were 36 surpluses and 11 deficits. During this period 55% of the national debt was paid off.
        The next period of major increase in the national debt took place during World War I, reaching $25.5 billion at its conclusion. It was followed by 11 consecutive surpluses and saw the debt reduced by 36%.
        Social programs enacted during the Great Depression and the buildup and involvement in World War II during the F.D. Roosevelt and Truman presidencies in the 1930s and 1940s caused the largest increase – a sixteenfold increase in the gross public debt from $16 billion in 1930 to $260 billion in 1950. When Roosevelt took office in 1933, the national debt was almost $20 billion; a sum equal to 20 percent of the U.S. gross domestic product (GDP). During its first term, the Roosevelt administration ran large annual deficits between 2 and 5 percent of GDP. By 1936, the national debt had increased to $33.7 billion or approximately 40 percent of GDP.[4] Gross debt relative to GDP rose to over 100% of GDP to pay for the mobilization before and during World War II.”

  • Pizza the Hut

    Must give greater power to shareholders to stop high ceo pay. Sad thing is government wont stop it cause they get contributions to thrir campaigns.

    • Gonzo

      Problem is the shareholders only care about the return on their investments. Oh, gee you had to lay off 4000 people to give me another dollar a share profit? Good Job!!

      • Pizza the Hut

        U think all share holders like ceos taking home a huge bonuses. We r all screwed

      • John Cross

        The shareholders are all fixated on the price per share. It is a way of taking even the most lowly of persons and making them into mini-capitalists. They usually get bamboozled into doing whatever the Execs want because they are told the stock price might fall if the company seems “unstable”. Stupid but true. What they SHOULD do at that point is sell whatever shares they have b/c a leadership that survives through blackmail is a pretty shoddy form of leadership.

    • Pipercat

      Forgot about that name. One of the two, or three, truly funny things about that movie.

  • Pipercat

    Number two, after Walmart, on the don’t-buy list: Cisco!

  • JoeNCA

    Cisco is a rent seeker. They bought Flip simply so they could destroy it because they feared it hurting their profits of their telepresence margins. They’re the worst kind of capitalists.

  • Gonzo

    Cisco is already turning out more crap than ever. They know their product line is sinking and they’re doing what they can to bolster up the profits before the company tanks.
    They’ve ruined the Linksys brand since taking it over, doing the same thing with that company’s workforce when they were assimilated.

    Disgusting, and there are already several other options out there for IT people to chose from.
    The sad part is when the company does tank, the rest of their workforce will be out of jobs too……and the CEO’s and upper managers will walk away with big fat bonuses, golden parachutes, and go on to ruin some other company and the lives of its employees.

    • Pipercat

      They really do produce a lot of shit. Deliberately complicated shit which requires a CCNA to program their overpriced shit. Of course, the CCNA is supplied by a third party who usually assign a total dweeb that sets up and walks away, from the shit, never to answer their phone again. They are never on my consideration list.

    • jchastn

      I agree. Cisco is crap. The worst network shit available. Yet companies still buy it like it is good. IT and IS people know it is shit and embrace it because for them, it is job security.

  • cpadd

    the next french revolutions is just around the corner, this guy wants to be in the front of the line…

  • klhayes

    A company will work with as few employees possible. When new technology comes along that can replace people or a technology is obsolete….buh-bye!

  • Shon

    There is more to this story. There always is.
    But in the end, this company will fail. How did they post record profits this year? What did they DO to do that? Were they just lucky?
    They had just acquired a few other companies, and in the process, integrated their employees. That’s a lot of people to acquire, too. Maybe they are getting rid of redundancy? OR is it your opinion that they should just keep people, because it looks bad if they don’t?
    There is a lot more to this story, and a lot of spin in this article. How about you give us some more facts, and keep your spin for the “introduction” and the “conclusion”.

    • Aaron Childers

      This isn’t a news story. It’s a political rant blog. You’re complaining about spin? Do you even watch the news? If you read the ‘about the author’ paragraph just under every article it reads, ” he routinely voices his opinions and stirs the pot for the Progressive movement.”
      Maybe you just like to call people out and that is fine, but wouldn’t it be more significant to call out an actual media company? Commenting on a political blog and proclaiming that it has a “spin” is redundant. If anything should be taken from this piece, it’s that Cisco basically fired 4,000 employees when they could obviously afford not to. That is the point. The opinions expressed are merely entertainment.

    • Sean

      No, what was said is THIS is why trickle down is a fallacy. Even if I accept redundancy or any other excuse you have, it shows that lowering tax rates, easing regulations or having the “business friendly” environment does NOT help keep people employed. In fact it shows that the ONLY thing that forces a company to hire more people is demand. If GM sells more cars, they hire more people, if not, they wont.. What they pay in taxes or any other expense of an industry is irrelevant to employment.

  • Never Again

    Yep, I was laid off twice from Cisco. Before that, I was doing the the work of 5 employees because the way Cisco continues to push their profit numbers higher is by getting rid of their workforce. They outsource to the lowest bidder, and it’s showing in their products. Chambers should have been let go a very long time ago.

  • dmiller64152

    I work with the mid-level employees of a number of Forbes 500 firms. Every day I see people who can’t possibly do everything expected of them, with workloads that used to be tasked to two (or more) employees. The companies end up paying my organization a small fortune to pick up the slack. We’re their IT provider, and of course I see little of the $135/hour for which I’m billed out. It goes to MY CEO. Ridiculous cycle.

    • Pipercat

      Bet there’s a non-compete clause buried in your paperwork.

  • Matthew Reece

    “So ponder this — the company wants to continue to push forward to become
    the ‘worlds #1 IT company,’ yet it’s laying off 5% of its workforce.
    Who’s going to cover that workload? Oh, that’s right, the employees
    they don’t layoff will just be given an even larger burden to deal with
    at work.”
    Not necessarily. It may be the case that machines are able to do some work that once required human labor. If so, this is a good thing because it frees up those workers to work at other businesses or create new ones, while also allowing Cisco to lower prices, thereby leaving more money in the pockets of its customers, which will be spent elsewhere in the economy. I am not familiar enough with the internal workings of Cisco to be sure, but this possibility must be considered.

    • jchastn

      Don’t count on it. It is probably just higher workloads for the remaining workers.

  • Justin

    There is only one place in the world that has seen “Trickle Down Economics” come even close to working. That is my home province of Alberta. The ONLY reason that Alberta came close to having it work was because of the massive oil resources that the province has to offer. But again, this is not due to the economic policy itself, but due to the overwhelming demand that the world has for oil. There was also only one year that the late Premier Ralph Klein allowed some of the wealth to “trickle down” to the taxpayers… A whopping $400 to each taxpayer that has not been repeated since.

  • Sam Brosenberg

    Blame Obamacare, Rabble Rabble Rabble!