Cisco to Cut 6,500 Jobs in Cost Cutting Effort

Cisco pulled the trigger on job cuts with the announcement of the elimination of 6,500 positions, including about 2,100 employees who agreed to early retirement. Cisco also sold a Mexico-based set-top-box manufacturing facility which employs 5,000 people to Foxconn.

Cisco (NASDAQ:CSCO) will cut 6,500 jobs in an effort to cut costs and simplify its organization, the company announced Monday. The cuts are part of the company’s $1 billion annual operating expense reduction. The 6,500 includes about 2,100 employees who elected to participate in a voluntary early retirement plan.

The reduction also includes 15 percent of vice president level and above employees, Cisco said in a statement. Overall it represents about 9 percent of Cisco’s full-time workforce.  Those affected employees will be notified during the first week of August, and further workforce reductions will occur at a later date, Cisco said.

Cisco estimates it will incur up to $1.3 billion in restructuring charges over several quarters consisting of severance and other one-time termination benefits. Cisco said substantially all of these charges are cash-based.  Cisco expects that approximately $750 million of these charges will be recognized during the fourth quarter of fiscal 2011, including approximately $500 million relating to the voluntary early retirement program.  The remaining balance of the charges is expected to be recognized during fiscal 2012.

Cisco also announced plans to sell its set-top box manufacturing facility in Juarez, Mexico to Foxconn Technology Group. The approximately 5,000 employees at the facility will become Foxconn employees effective in the first quarter of fiscal 2012. No job losses are expected as part of the sale. Cisco said the sale’s primary strategic intent was to simplify business operations, but it is also expected to improve Cisco’s long term cost structure.