Cisco to drop 11,500 employees

Following through on its promise to trim staff as part of an overall cost-reduction effort, Cisco (NASDAQ: CSCO) will reduce its workforce by approximately 11,500 employees. The reductions will come via a combination of layoffs, buyouts, and the transfer of a set-top box manufacturing facility in Juarez, Mexico, to Taiwanese contract manufacturer Foxconn Technology Group.

Approximately 6,500 of the 11,500 employee reduction will come directly through either layoffs or buyouts. Cisco says approximately 2,100 employees have elected to take early retirement, which means approximately 4,400 workers will be laid off. The reduction affects approximately 15 percent of employees at the vice president level or above and 9 percent of the company’s total workforce, Cisco says. Affected staff in the United States, Canada, and what Cisco called “select countries,” will receive notice in the first week of August; the remaining layoffs in other parts of the world will occur later in the year as Cisco ensures compliance with local laws and regulations.

The reductions are part of an overall program to trim annual operating expenses by approximately $1 billion. Before those savings are realized, however, Cisco estimates these staff reductions will result in total pre-tax restructuring charges to its GAAP financial results of no more than $1.3 billion over several quarters, consisting of severance and other one-time termination benefits. Substantially all of these charges are cash-based. Cisco said it expects that approximately $750 million of these charges will be recognized during the fourth quarter of fiscal 2011, including approximately $500 million related to the voluntary early retirement program. The remaining balance of the charges is expected to be recognized during fiscal 2012.

The remaining 5,000 of the 11,500 total headcount reduction will occur when Cisco completes the sale of the Juarez set-top box manufacturing facility to Foxconn Technology Group. The facility’s workers will become employees of Foxconn in the first quarter of fiscal 2012; no job losses are expected as a result of the sale.

While the layoff and buyout totals fell short of the 10,000 some sources had featured, the total reduction exceeded that figure (see “Cisco cutting 10,000 jobs?”). The company also plans to reshuffle its organizational structure to streamline operations and focus on core businesses (see "Cisco: Layoffs are coming).