RIM's Problems Are More Serious than Cisco's


Two of the highest-profile companies in the telecom and IT space - Research In Motion and Cisco - have suffered layoffs during the past few weeks.

That of course isn't good news, but the two companies' moves may not be a harbinger of doom. In a press release, the employment firm of Challenger, Gray & Christmas said that the attention paid to Cisco's cuts suggest that the tech economy actually is in fairly good shape:

In past years, the 6,500 job cuts announced this week by Cisco Systems probably would not have stood out, particularly in a sector that at one time commonly saw job-cut events numbering in the tens of thousands. This year, however, the Cisco announcement stands out as the largest job cut of the year in a sector that is experiencing record low downsizing.

So the fact that it is news at all is, in a sense, good news. It seems that the Cisco layoffs are more of a sign of what is going on with the company than conditions in the broader IT industry. This is the tack taken by the Mercury News story:

Tech experts, however, said some of Cisco's problems are its own, rather than symptoms of broader industry troubles.

That site and others pointed to adjustments by the company in the wake of some disappointing results:

Financial analysts say the layoffs may be a painful necessity for Cisco, which has seen profits decline after it expanded into numerous tech markets that are outside its core business of selling networking gear for commercial computer networks.

The sense of a momentary and correctable glitch may not be applicable to another iconic firm, Research In Motion. It is cutting 2,000 workers - about 11 percent of its work force, according to eWeek. The story goes into some details on the timing of notifications - this will be done this week - and reassignment of some executive duties. It is a bit early for analysis.

It's interesting that one of the companies is wireless and the other is, for the most part, a wireline stalwart. It seems that RIM's problems are more fundamental than Cisco's, though it really isn't the handset company's fault. While Cisco seems to have taken some missteps, it remains the predominant company in the growing world of networking. It is true that much of the growth in recent years is on the wireless side. But, of course, those signals ultimately hit must be ferried across wired networks.

RIM, on the other hand, seems to be largely bypassed by the explosion of smartphone creativity unleashed by the introduction of the iPhone and followed by the development of Android. It simply is not operating from a position of dominance, as Cisco is. Instead, even a smoothly running RIM faced an uphill battle - and one that was bound to get steeper as the multitude of vendors focused more strongly on the enterprise market, which was always RIM's strength.