Cisco Systems plans to cut 15 per cent of its jobs and sell a factory as part of a plan to cut annual expenses by $1 billion as the network equipment maker tries to revive its fortunes.
The cuts are deeper than what financial analysts expected. The company said yesterday that it will cut 11,500 jobs, compared with the several thousand that analysts predicted. The cuts come after Cisco's chief executive John Chambers said in April that the company lost its way.
The company had 73,408 employees as of the end of the last quarter, a spokeswoman said. Cisco will transfer 5,000 to Taiwanese contract manufacturer Hon Hai Precision Industry which will buy the Cisco plant in Juarez, Mexico.
Of the other 6,500 who are leaving, 2,100 will get early retirement.
"This is a net positive for the company and for investors," said Morningstar analyst Grady Burkett.
Cisco said in May that it would reorganise the company, which has been losing ground in the network equipment business.
The job cuts will result in pre-tax restructuring charges as high as $1.3 billion over several quarters.
Cisco expects to incur about $750 million of the charges in the fourth quarter of its fiscal year 2011, including $500 million for the early retirement program. It did not say how close the cutbacks would bring it toward its goal of reducing annual costs by $1 billion.
About 15 per cent of Cisco executives at the level of vice president and higher will lose their jobs too.
Cisco will notify US and Canada-based employees who are losing their jobs in the first week of August. The layoffs in other countries will take place later than this in compliance with local laws and regulations, Cisco said.
Reuters
