Cisco Systems Inc. (CSCO: Quote) said Monday it will eliminate nearly 6,500 jobs globally in an attempt to cut mounting costs. Separately, the networking-equipment giant has agreed to sell its Juarez, Mexico-based video equipment unit to Foxconn Technology Group, the terms of which were not disclosed.
San Jose, California-based Cisco said the job cuts include about 2,100 employees who opted to retire voluntarily, and comprise nearly 15 percent of vice president level and above positions.
Those impacted by the job cuts, representing nearly 9 percent of its regular workforce, will be suitably compensated, the company stated.
The first to face the workforce reduction will be employees in the U.S., Canada and select countries in the first week of August, while the remainder are expected at a later date.
As a result of the job cuts, Cisco expects to recognize total pre-tax restructuring charges to its GAAP financial results of not more than $1.3 billion over several quarters, consisting of severance and other one-time termination benefits.
The company estimates that about $750 million of these charges will be recognized during the fourth quarter of fiscal year 2011, including nearly $500 million relating to the voluntary early retirement program. The remaining is expected to be recognized during fiscal year 2012. The company also expects to incur other charges related to its reorganization program.
Cisco has been struggling to cope with rising costs that has threatened to derail its growth. In May, the company reported an 18 percent decline in profit as higher expenses more than offset a 5 percent increase in revenue.
In April, Cisco announced the closing of its Flip Video camera business, and in May, announced changes to its business structure to simplify operations and to enhance customer focus.
The job cuts and exiting less-profitable businesses are expected to help Cisco in its profit growth plans, by taking back market share from its competitors, who offer lower-priced, simpler products.
In a separate development, Cisco agreed to sell its manufacturing facility in Juarez, Mexico, to Foxconn Technology Group. The transaction is subject to regulatory approvals and is projected to close October 2011.
The nearly 5,000 people employed at the facility will become employees of Foxconn in the first quarter of fiscal year 2012 and no job losses are expected as a result of the sale.
The facility manufactures video and telecommunications equipment for the service provider market. Cisco assumed ownership of the Juarez facility with the acquisition of Scientific Atlanta in 2006.
CSCO closed Monday's regular trade at $15.44, down $0.15 or 0.99%, on a volume of 48 million shares on the NYSE.
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by RTT Staff Writer
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