Cisco confirms nine per cent of workforce will go

Cisco has confirmed the widespread layoffs rumoured last week, announcing that it will reduce its regular workforce by nine per cent, or around 6,500 employees.

The networking firm said that the total includes 2,100 employees who elected to participate in a voluntary early retirement programme.

Employees at vice president level and above will be worst affected by the cuts, with 15 per cent of these senior positions set to go, according to the firm.

Affected workers will be notified at the beginning of August, and the remainder of the reductions are expected to occur at a later date.

Cisco said that the cuts are part of a comprehensive plan to simplify the organisation, refine operations and reduce annual operating expenses.

The company also announced on Monday that it will sell its set-top box manufacturing facility in Mexico, along with the transfer of 5,000 employees to Chinese firm Foxconn Technology Group in the first quarter of 2012.

Rumours that Cisco was planning the cuts were in full swing last week but initial estimates for job losses now seem a little high.

Cisco said in its third-quarter earnings call in May that expenses would be cut by $1bn between the fourth quarter of this year and the end of 2012.

The call came after the firm announced a year-on-year profit decline of nearly 18 per cent to $1.8bn.

Chief executive John Chambers said on the call that switches and the public sector are two areas posing the most problems for Cisco.

Chambers spoke to analysts in April about how Cisco plans to focus on five areas: cloud computing, business collaboration tools, network routing and switching, computer system architecture and video communication.

IDC analyst Chris Barnard told V3.co.uk that Cisco had no choice but to go ahead with the cuts.

"Cisco had to do something given the customer criticisms and stock price. There is a clear duplication in its business, which it needs to take out, while moving away from non-core areas," he said.

"Customers need to feel they are getting true value from the Cisco relationship, as do its channel partners."

Barnard suggested that Cisco's culture will improve as a result of the cuts. "It's a resilient organisation, and the cuts will help it become more focused than it has been in years," he said.

Meanwhile, Ovum analyst Jens Butler praised Cisco's greater emphasis on its core competencies and on creating a cleaner engagement model.

"It is clear that Cisco is listening to and shifting with market dynamics, rather than attempting to force the market on its own," said Butler.