Cisco announces plans to trim workforce by 11,500, or 16%

Cisco (NASDAQ:CSCO), which has had two consecutive under-performing quarters that prompted CEO John Chambers to vow $1 billion in cuts this year, has announced plans to reduce its workforce by 11,500, or about 16 percent.

The company said it would lay off 4,400 employees from its global workforce of more than 73,000 and that 2,100 more employees had opted to take part in an early-retirement offering. Of the 4,400 layoffs announced, Cisco said about 975, or 15 percent, would be executives with job titles of vice president or above.

The company estimates the moves will cost it $1.3 billion over several quarters, consisting of severance and other one-time termination benefits. Cisco expects that approximately $750 million of these charges will be recognized during the fourth quarter of the 2011 fiscal year, including approximately $500 million relating to the voluntary early retirement program. The remaining balance of the charges will be absorbed during the 2012 fiscal year.

A Cisco spokesperson said the employee reductions announced would be enough to reach the $1 billion cost-cutting target Chambers set in May.

Cisco also said it was selling a set-top box manufacturing plant in Juarez, Mexico to a Taiwanese firm; the plant has about 5,000 workers who likely will remain as employees of the Foxconn Technology Group. The deal is expected to close in October.

Gleacher & Co. analyst Brian Marshall said that the staff reductions were a good first step for Cisco, but he added that the remaining questions, e.g. how Cisco would fix the top line and drive revenue growth and product innovations, need answers.

For more:
- see this release
- see this WSJ article

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