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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

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.