Cisco to fire 6500 employees to cut costs

The figure amounts to 9 percent cut in the full time employees, and the plan is an effort to simplify the organization, refine operations, and reduce annual operating expenses.

The world's largest maker of computer-networking equipment said that the cut will cost the company the $1.3 billion in terms of severance and termination benefits.

Cisco had already declared in May that it would eliminate jobs in thousands to lower down the operating expenses, but the actual numbers were not known. Therefore, this move by the company was anticipated, and the announcement was expected after the end of July quarter.

Cisco also said it would disclose additional steps in its reorganization when it releases its quarterly earnings on Aug. 10 and at an analyst conference on Sept. 13.

Layoff details
The San Jose, California-based company has approximately 73000 employees worldwide.

Cisco said that about 2,100 employees would be opting for a voluntary retirement plan and the layoff would be for the remaining 4,400.

About 15 percent of employees at or above the level of vice president are being laid off.

In a blog post, Cisco said “Impacted employees in the United States, Canada and select countries will be notified during the first week of August. The remainder of the global workforce reductions is expected to occur at a later date in compliance with local laws and regulations.”

Sale of a set top box factory in Juarez
Cisco has also announced that it is selling a set-top box manufacturing facility in Juarez, Mexico. This would result in the layoff of another 5,000 employees.

Cisco also said it would disclose additional steps in its reorganization when it releases its quarterly earnings on Aug. 10 and at an analyst conference on Sept. 13.

Challenges ahead
Citi Analyst John Slack wrote in a note to investors Monday, “The greater challenges the company faces are slowing growth and defending of its core switching and routing market, which will likely be a multi-quarter or multi-year process to turn-around, in our view.”

The company also faces tough competition from Huawei, Alcatel-Lucent, and Juniper Systems.

"We are relentlessly focused on driving profitable growth and delivering value to our shareholders, and we believe we are on the right track to do so," stated the company.