Cisco CEO John Chambers confirmed his position on Wednesday that unless U.S. tax laws are changed, he will be forced to move more of Cisco’s workforce overseas.
“I prefer to have the majority of my employees right here in America. That’s the right decision for us, but if we can’t bring our cash back, we’re going to grow dramatically overseas in terms of job placements,” he said during an interview with CNBC on Wednesday.
Cisco has about $46 billion in cash with about 80 per cent stored overseas. If Cisco spends it in the U.S., the company will have to pay 35 per cent in taxes.
Cisco isn’t alone. U.S. companies have about $1.7 trillion in overseas cash. Many big tech companies, like Microsoft, Oracle and Apple, have billions parked there.
In February, Chambers said he was no longer willing to use his overseas cash to acquire U.S. companies. He’s been true to his word. So far in 2013, Cisco has bought four companies, none of them from the U.S.
That’s a blow to the startup world. Cisco has always been one of the biggest shoppers around. In 2012, Cisco bought 11 companies, nine of them from the U.S.
Chambers has been lobbying to get that tax rule changed for years. He wants low tax rates when that money is used here (called repatriation), or preferably, no taxes at all (called a repatriation holiday).
Cisco can’t bring its money back to pay out shareholders, either. Chambers said shareholders haven’t been hurt. He said of the $3.1 billion of cash from operations Cisco generated last quarter, it spent almost $1.8 on shareholder programs, about half on dividends and the other in share buybacks.
Meanwhile, Cisco has been regularly laying off workers, many in the U.S., ever since it slid into a tailspin in 2011. Cisco calls these layoffs “the Accelerated Cisco Transformation Program (ACT).” In March, Cisco laid off 500 people, less than 1% of its workforce, as part of layoffs that began when Last July, the company laid off 2% of its workforce.
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