Updated with Cisco Confirmation: If you want to know how bad it is going to get for all of us in Silicon Valley, just look at Cisco Systems (s CSCO). For first time in its history the company is going to shut down for four days at the end of the year, according to a report by UBS Research. Remember when such shutdowns were associated with industrial era companies? Well, this is the new past as they say. I heard that a major internal annual event has been put on hold as well.
Cisco’s four-day shutdown is part of an effort by the company to save $1 billion. It might be more than just cost savings because Cisco (and many of us) doesn’t have visibility into 2009. Cisco, as a company has just seen Wall Street, a major customer shrink in size. At the same time it is facing low-cost competition from Dell (s DELL), HP (s HPC) and Huawei. The New York Times is correct in identifying HP’s ProCurve businesses as slowly becoming a major competitor to Cisco. “HP is a much more formidable challenger to Cisco, and it has sent an obvious message,” Nikos Theodosopoulos, an analyst at UBS Securities told The Times.
Cisco has confirmed the shutdown and other cuts in a blog posting pointing out that it had started talking about these initiatives following its Q1 2009 earnings release
We will be target reductions in travel and discretionary-related expenses, including offsites, outside services, equipment, events, trade shows, marketing and other activities. As part of this effort, we will also implement a year-end shutdown of the US-Canada theater from December 29, 2008, through January 2, 2009 (note that January 1 is already a holiday). There will be some exceptions for targeted business-critical teams including technical assistance services and channel partner and customer product ordering services.
While this is not our first year-end shutdown as we followed this longstanding Silicon Valley practice in our early years as a company, it is our first in over a decade. Given the difficult macroeconomic conditions, we believe our cost control focus at this time is appropriate while still providing our partners and customers with critical services over the holiday period.