Cisco to cut 6,500 jobs in cost-cutting blitz

SAN FRANCISCO — Cisco Systems Inc. will cut about 6,500 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 nine per cent of Cisco’s regular, full-time workforce. In the ranks of vice-president and above, Cisco said it will cut 15 per cent of employees.

The cuts will be made across all functions in the company. Of the 6,500 employees, 2,100 will take early retirement under a voluntary program Cisco [Nasdaq: CSCO] announced in April.

The company will incur about US$1.3 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 recognize US$750 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 U.S., 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 on Monday, Cisco 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 5,000 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 said it would close down its Flip video division and fold 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.

Last week at its annual Cisco Live! conference Chambers tried to focus on the positive, but he didn’t disguise the fact that the company had to be overhauled.

In after-hours trading Monday, Cisco’s share price was stable after falling $0.15 to $15.44 during normal trading hours. Over the past 12 months, the company’s stock has fallen by nearly one-third, from $22.73 last July 19.

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