Cisco Cuts Nearly 10 Percent of Employees

Cisco announced on Monday that it will be reducing its workforce by 6,500 employees in August.

According to the company, the total loss will consist of 2,100 opting for early retirement and 4,400 facing layoff. An additional 5,000 employees will be transferred to Foxconn Technology Group, which recently purchased Cisco's set-top box manufacturing plant in Mexico. This reduction will account for an estimated cut of $1 billion from Cisco's overall operating expenses.

"As we execute on our action plan, we are looking at our portfolio from both a current and long-term market potential and return perspective," wrote Cisco in a press release. "And we are moving quickly to sharpen our focus on a network-centric growth strategy."

Cisco's current portfolio is already feeling the impact of the announced layoffs -- its stocks ended Monday with a gained 1.3 percent to settle at $15.65 per share. However, some market analysts aren't so sure that this news will lead to continued immediate gain for the company.

"The cuts are drastic and could have a near-term negative impact, especially on morale," Wedbush analyst Rohit Chopra said to The Wall Street Journal. "However, we see this as an important long-term adjustment to a business model which had little leverage and was in danger of becoming less competitive."

Today's job loss announcement is part of an ongoing Cisco "action plan" for 2011 that looks to clearly define its "network- centric strategy" and to "simplify the organization, refine operations, and reduce annual operations expenses." It also is an attempt to stop the recent steady decline of the company's stock prices.

In a letter to Cisco in June, former Presidential candidate and company shareholder Ralph Nader wrote that the company needs to start focusing on improving the overall value of the brand. "It is time for a long overdue Cisco shareholder revolt against a management that is oblivious to building or even maintaining shareholder value," he wrote. "It is as if management is in a counter-intuitive, bizarre, defacto conflict of interest against its own company investments and those held by their institutional and individual shareholders."

Along with the reduction in its workforce, Cisco will attempt to do this with its enterprise-focused Cius tablet, which will retail for $750 and is rumored to be released at the end of the month.

About the Author

Chris Paoli (@ChrisPaoli5) is the associate editor for Converge360.


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