Cisco to shut down production for five days

A day after Indian auto  manufacturer Tata Motors announced its intention to curtail production for five days, American tech major Cisco has decided to implement a similar measure. (See: Tata Motors to shut Jamshedpur plant for five more days)

Cisco Systems Inc, the world's biggest networking-gear maker, plans to shut its North American offices for five days for the first time in more than a decade and  save $1 billion in costs. The company's US and Canada offices will be closed from 29 December through 2 January, spokesman Terry Alberstein was reported as saying. Some teams, including technical support, will be working.

The planned shut-down was first reported on Tuesday morning in a report by Nikos Theodosopoulos, analyst with Swiss bank UBS. The Wall Street Journal later ran a story on its website citing a spokesman for Cisco who, it said, confirmed the plan.

UBS said Cisco was aiming for more than one billion dollars in savings and "we believe it is prudent for Cisco's management team to plan for cushion in the event of weaker than expected revenues." Cisco warned earlier this month that revenue could drop between five percent and 10 per cent during the current quarter, a figure UBS said was "realistic."

Customers are withholding orders because of the financial crisis, forcing Cisco to suspend hiring, business travel and relocations in a bid to cut expenses. CEO John Chambers forecast a revenue decline for the first time in five years for the second quarter, which ends in January.
Cisco, founded in 1984, projected this month that revenue will decline by as much as 10 per cent from the year-earlier period, to about $8.85 billion. Its shares fell 98 cents, or 6 per cent, to $15.42 at 4 pm New York time in NASDAQ Stock Market trading. The shares have fallen 43 per cent this year.

The last time the company had implemented such a drastic cost-cutting step was in the 1980s, when Cisco had shut down operations for the week between Christmas and New Year's Eve.

From selling off assets to shedding jobs, companies around the world are trying every trick in the book to cut costs in the midst of the global financial crisis. A new option has also gained currency – temporarily shutting production of goods that have no buyers.