Cisco Systems plans to cut 15% of its staff and sell a set-top box factory as part of a plan to cut annual expenses by $1 billion as the network equipment maker tries to revive its fortunes.
The company said last night that it will cut 11,500 jobs, compared with the several thousand that analysts had predicted. The cuts come after Cisco's chief executive John Chambers said in April that the company had 'lost its way'.
Cisco had 73,408 employees as of the end of the last quarter, a spokeswoman said. The company will transfer 5,000 workers to Taiwan's Hon Hai Precision Industry , which will buy the set-top box plant in Juarez, Mexico. Of the other 6,500 who are leaving, 2,100 will take early retirement.
The news came on the same day that Borders Group, the second-largest US bookstore chain, cancelled its bankruptcy auction plans and said it would close for good. Nearly 11,000 people will lose their jobs.
Cisco's global scale and a clientele spanning businesses and government agencies has made it one of the technology sector's heavyweights. The management team's record of controlling costs and growing the business through acquisitions also made them a darling of tech investors over the years. But a fragile global economy proved more damaging than initially expected.
Cisco had said in May that it would reorganise after losing ground in the network equipment business.
The job cuts will result in pre-tax restructuring charges of as high as $1.3 billion over several quarters. Cisco expects to incur about $750m of the charges in the fourth quarter of its fiscal year 2011, including $500m for the early retirement programme.
It did not say how close the cutbacks would bring it toward its goal of reducing annual costs by $1 billion. About 15% of Cisco executives at the level of vice president and higher will lose their jobs too. The sale of the Juarez factory is in line with company strategy, said Cisco spokeswoman Karen Tillman.
Cisco outsources about 90% of its manufacturing to contract manufacturers. Hon Hai is the flagship listed unit of the Foxconn group, which is best known for making Apple's iPhones and iPads.
Its various business units also make products for companies including Hewlett Packard and Dell. It is seeking to transform itself into a technology firm and move away from the low-margin contract manufacturing.
The Foxconn group, which employs close to a million workers in China, made headlines last year after reports emerged about poor working conditions at factories in southern China, which critics say may have helped drive several employees to suicide.
