Cisco will cut 9 percent of its workforce starting in August, according to officials. In addition, another 5,000 jobs will be shed after Cisco sells a manufacturing plant in Mexico to Foxconn.
executives will cut 6,500 jobs starting in August as part of their efforts to
reorganize and streamline the company after several quarters of disappointing
The networking giant announced July 18
that about 9 percent of the company's 73,000 employees will
lose their jobs, with about 2,100 leaving via a voluntary early retirement
program. In addition to the 6,500 job cuts, Cisco (NASDAQ: CSCO) will lose
another 5,000 employees with the sale of its set-top-box manufacturing plant in
Mexico to China-based Foxconn Technology Group, which is best known for
building such devices as Apple's iPhones and iPads.
None of the
employees at the facility in Juarez, Mexico, were expected to lose their jobs,
according to Cisco officials. Instead, they will become employees of Foxconn.
There has been
speculation about job cuts since earlier this year, when Cisco Chairman and CEO
John Chambers, following another difficult financial quarter, said changes
needed to be made to get the company moving in the right direction. Cisco had
seen several quarters of disappointing revenue and forecasts, prompting Chambers to write a lengthy memo
to employees about the need to make changes.
Cisco restructured its consumer business, including shuttering its profitable Flip video camera unit
, a move that cost about 550 jobs. In May, Cisco reorganized its sales, services and
. Later that
month, Chambers, while talking with journalists and analysts about the
quarterly financial numbers, said more streamlining was needed, and that that would include job cuts
. The reductions are part of a larger plan to save $1
billion in operating expenses this year.
earlier this month said the job cuts could number between 5,000 and 10,000
"While this is
a difficult decision to make, in our view, it is required in order to maintain
the -competitiveness' of [Cisco] going forward," Gleacher & Co. analyst
Brian Marshall wrote in a research note July 11.
Cisco, about 15 percent of executives at the vice president level and above
will be included in the layoffs. All impacted employees will receive severance
pay and outplacement assistance. The job losses will be in the United States,
Canada and other "select countries," according to the Cisco
past few months, Chambers has noted that many of Cisco's businesses continue to
see growth, including its UCS (Unified Computing System) converged data center
offering, which after two years now has 5,400 customers. In addition, other
areas-such as collaboration and emerging markets-continue to perform well.
company has seen slowing numbers in its public-sector business, and has seen
its market share drop in its core switching and routing units as it faces
growing competition from the likes of Hewlett-Packard and Juniper Networks.
Some analysts have speculated that Cisco's efforts to expand into other
business sectors-such as collaboration, smart-grid technology and consumer
technology-may have distracted it, enabling HP, Juniper and others to make
inroads in the networking space that Cisco has dominated.
In his report
earlier this month, Gleacher's Marshall noted that Cisco still holds about 70
percent of the core routing and switching market, and that other businesses-including
video communications, data center infrastructure and its Vblock
data-center-in-a-box offering-are gaining traction.
said the company needs to take other steps along with the job cuts, including
formally lowering its long-term financial targets. Chambers over the past
couple of years had said he was targeting annual revenue growth for Cisco at 12
to 17 percent, though he said in May that that goal was "off the table."
Marshall said a more modest goal of 10 percent or so made more sense.