Wed, Jul 20, 2011 - Page 10 News List

Cisco to lay off thousands of workers

‘BOLD STEPS’:The cuts will set the company back about US$1.3 billion in severance and termination benefits, charges that the firm will spread out over several quarters


A pedestrian walks past a sign bearing the Cisco logo on Feb. 3 last year at the technology company’s campus in San Jose, California.

Photo: Reuters

Cisco Systems Inc, the world’s largest maker of computer-networking equipment, is reducing its work force by about 9 percent to reduce costs and raise profits as the company tries to become more competitive.

Monday’s announcement to cut 6,500 of its roughly 73,000 worldwide employees follows up on a plan disclosed in May to eliminate thousands of jobs. Two-thirds will come through layoffs and the rest through an early-retirement plan. The company said 15 percent of employees at or above the level of vice president are being eliminated.

Cisco has long been a high-growth company, but after rebounding from the recession, its sales started stalling about a year ago. Critics have long said that Cisco tries to compete in too many markets.

CEO John Chambers acknowledged that criticism in April and sent employees a memo vowing to take “bold steps” to narrow the company’s focus. Cisco killed off its Flip video camcorder business that month and it reorganized its management structure a month later. Monday’s cuts represent Cisco’s latest attempt to simplify.

Cisco is also suffering from rising competition from companies like Juniper Networks Inc and Hewlett-Packard Co in the market for computer-networking equipment, including the routers and switches that direct the flow of data traffic.

Cisco said the cuts would cost it US$1.3 billion in severance and termination benefits. The company, which is based in San Jose, California, plans to take the charge over several quarters. It will take US$750 million of that, including US$500 million for the early--retirement program, during the current quarter.

Cisco will inform employees who have been cut in the US, -Canada and some other countries during the first week of next month. The rest will come later to comply with local laws.

Gleacher & Co analyst Brian Marshall said the cuts were in line with what he was expecting.

“Obviously, while an unfortunate event, it’s a necessity for Cisco to heal and get back on a competitive stature in the industry,” he said.

Also on Monday, Cisco said it agreed to sell its Juarez, Mexico-based set-top box manufacturing plant to Foxconn Technology Group (富士康科技集團), a Taiwanese company that makes many Apple products. The plant’s 5,000 employees will join Foxconn by October. Those 5,000 are in addition to the 6,500 being cut from Cisco.

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