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Cisco to cut 6,500 jobs after ambitious expansion plans

By Jon Swartz, USA TODAY

The staggering job reduction, which amounts to 9% of the company's workforce, was announced after financial markets closed Monday. It is the largest at Cisco (CSCO) since March 2001, when it shed 6,000 full-time workers and 2,000 contractors.

Cisco said it intends to notify affected workers in the U.S., Canada and other countries in the first week of August. Nearly one-third of the layoffs — 2,100 — came after employees accepted an early-retirement offer that Cisco announced in the spring. In regular trading, Cisco shares dipped 1% to $15.44.

Cisco also announced the sale of its set-top-box-manufacturing facility in Juarez, Mexico, to Chinese electronics manufacturer Foxconn Technology Group. That plant's approximately 5,000 employees — whom Cisco took on after it bought Scientific Atlanta in 2006 — will work for Foxconn. No job losses are expected at the facility, Cisco said.

Last week, Cisco CEO John Chambers discussed the framework for jostling the networking giant out of its financial doldrums in a keynote speech at Cisco's annual customer convention in Las Vegas.

The big layoff is the latest drastic move by Cisco to cut cost overruns after a series of lackluster earnings reports. Chambers has announced a management overhaul. The company shuttered its Flip handheld camera division in April, trimming 550 jobs. And Cisco has vowed to cut back on other underperforming business units.

In its most recent quarter, Cisco reported a $1.8 billion profit on revenue of $10.9 billion, but its profit plunged 17% from the same quarter a year ago. Cisco will report quarterly results Aug. 11.

Cisco is one of Silicon Valley's largest employers. Despite the elimination of 2,000 jobs in 2009, it had been one of the first companies to emerge from the recession with a bullish outlook. Indeed, Cisco added nearly 5,000 workers last year while expanding operations and stepping up acquisitions.

But critics said the networking company moved too fast and lost focus while diving into other commercial tech segments and some consumer markets.

Cisco's recent woes are more a reflection of its overly ambitious expansion plans than a turn for the worse among tech companies, Gartner analyst Ken Dulaney said. "It was a failure of vision for home technology."