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Cisco to reduce work force by 9 percent in cost-cutting effort, will take $1.3B charge
SAN FRANCISCO (AP) ' Networking equipment maker Cisco Systems Inc. is cutting 6,500 employees ' about 9 percent of its work force ' as it follows up on a plan announced in May to eliminate thousands of jobs to reduce costs and raise profits.
Cisco, which has about 73,400 employees worldwide, said Monday that it was laying off 4,400 layoffs people. Another 2,100 employees chose to leave as part of an early-retirement program. The company said the cuts include the elimination of 15 percent of its employees at and above the level of vice president.
Cisco said the cuts will cost it $1.3 billion in severance and termination benefits. The company plans to take the charge over several quarters. It will take $750 million of that, including $500 million for the early-retirement program, during the current quarter.
Cisco will inform employees who have been cut in the U.S., Canada and some other countries during the first week of August.
In May, Cisco said it planned to eliminate thousands of jobs as part of a larger plan to lower annual expenses by $1 billion, or about 6 percent. Cisco didn't say then how many jobs would be eliminated, but the number worked out to 4,000 to 5,000 if the percentage of job cuts were similar to the reduction in expenses. The exact number has been the subject of many analyst and published reports since then. The numbers announced Monday are much higher than the 6 percent figure.
The company, which is based in San Jose, has been struggling as competition rises from companies like Juniper Networks Inc. and Hewlett-Packard Co. in the computer networking equipment market. The employee cuts mark the third restructuring move Cisco has made in the past six months. The company restructured its consumer business in April by killing off its Flip video camcorder business. It May it reorganized its management structure.
Also Monday, Cisco said it agreed to sell its Juarez, Mexico-based set-top box manufacturing plant to Foxconn Technology Group, a Taiwanese company that makes many Apple products. The plant's 5,000 employees will join Foxconn in the first quarter of fiscal 2012, the company said.
Cisco's stock rose a penny to $15.45 in extended trading. The stock finished regular trading down 15 cents at $15.44.