Cisco to cut 6500 jobs in cost-cutting blitz

Layoffs will eliminate about 9 per cent of Cisco's workforce

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Cisco Systems will cut about 6500 jobs as part of an effort to focus its business and reduce operating expenses by US$1 billion per year, the company announced Monday.

The layoffs will eliminate about 9 percent of Cisco's regular, full-time workforce. In the ranks of vice president and above, Cisco said it will cut 15 percent of employees.

The cuts will be made across all functions in the company. Of the 6500 employees, 2100 will take early retirement under a voluntary program Cisco announced in April.

The company will incur about $US1.3 billion in one-time costs for the layoffs, from items such as severance and termination benefits. Those costs will be incurred over several upcoming quarters Cisco expects to recognide $US750 million of the charges in the fourth quarter of this year, including $500 million for early retirement, and the remainder in 2012.

Affected employees in the US, Canada and some other countries will be notified in the first week of August. Notifications will occur later in other areas, in accordance with local laws, the company said.

Also, Cisco has announced it will transfer a set-top-box manufacturing facility in Mexico to Taiwan-based contract manufacturer Foxconn. No jobs will be lost in that transaction, but about 5000 Cisco employees will be transferred to Foxconn.

Cisco is taking drastic efforts to cut costs and return its focus to its core routing and switching businesses after posting disappointing results and watching its stock fall over the past several quarters. Chairman and CEO John Chambers called for widespread changes in an internal memo earlier this year. In April, the company closed down its Flip video division and folded its Umi consumer video systems into the enterprise telepresence business.

By the time of its third-quarter financial report in May, when it posted an 11 percent decline in profit, Cisco had cut its growth forecast and announced it would eliminate jobs.