Cisco to axe 6,500 employees in massive restructuring

John Chambers, Cisco

John Chambers, CiscoNetworking giant Cisco Systems plans to lay off 6,500 employees as part of a massive restructuring plan, the company announced Monday.

The layoffs, which are one of the largest single layoffs this year and appear to be the largest single cut Cisco has ever made, amount to about 9 percent of Cisco’s total work force and 15 percent of executives at the vice president level and above. About 2,100 of those employees elected to participate in a voluntary early retirement program. The cuts will cost the company a one-time charge of $1.3 billion, of which $750 million will be recognized during Q4.

The cuts are much larger than predicted in previous reports, which expected a four percent (or 4,000 employees) downsizing of Cisco’s total work force.

The layoffs are part of Cisco’s larger restructuring plan set forth by CEO John Chambers, who pledged to shave a billion dollars from the company’s annual budget.

Along with the layoff announcement, Cisco said it will sell a set-top box manufacturing facility in Juarez, Mexico to Taiwan-based Foxconn Technology, the manufacturing giant that acts as the sole contractor for Apple’s iPad assembly. The sale will include the transfer of about 5,000 employees from Cisco’s payroll to Foxconn’s, effective the first quarter of the fiscal year 2012.

Previously, Cisco cut 550 jobs when it shut down its Flip video camera division in April 2011. The last time the company had such a large number of layoffs was 2002, when the company had to take a multibillion-dollar write-off after the dotcom crash and cut 2,000 jobs.