Cisco Announces Big Layoffs

By Sean Michael Kerner | Jul 18, 2011 | Print this Page
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The axe is set to drop for 6,500 employees of Cisco Systems (NASDAQ:CSCO).

Cisco today announced a 'workforce reduction' from its global operations of 6,500 employees across all functions. Of those 6,500 employees, Cisco has reported that 2,100 employees will be leaving by way of a voluntary early retirement program.

It's not just front-line workers that Cisco is axing. Of the 6,500 being laid off, 15 percent will be at the vice-president level or higher. While Cisco is notifying the public markets today about the layoff, Cisco noted in a press release that the affected employees won't be notified until the first week of August.

In addition to the 6,500 layoffs, Cisco is reducing its workforce by an additional 5,000 employees that will move to Foxconn. Those employees will move as the results of the sale of Cisco's set-top box manufacturing facility in Mexico. It is unclear how much Foxconn is paying for the facility. Cisco did not respond to a request for comment by InternetNews.com, by press time.

Cisco is providing some financial guidance about the impact of the staff reductions. Cisco expects to take up to $1.3 billion in charges related to severance and other termination benefits.

Cisco CEO, John Chambers had previously warned the market that he was set to reduce Cisco's operating expenses by $1 billion.

The employee layoffs come after a series of challenges faced by Cisco in 2011. Cisco shutdown its Flip camera division which it had paid $590 million to acquire in 2009. Cisco has also shuttered its Cisco Mail service, which was built on technology acquired in 2008.

Cisco also has seen a decline in its switching business revenues as new product introduction and competitive pressures take hold. In May, the company officially announced that it was reorganizing its business in an effort to streamline operations.

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.