Cisco To Lay Off 6,500 Employees, Sell Set-Top Factory

As part of Cisco’s $1 billion annual operating expense reduction, the company will reduce its global workforce across all functions by approximately 6,500 employees, which includes approximately 2,100 employees who elected to participate in a voluntary early retirement program. This also includes a reduction totaling approximately 15 percent of vice president level and above employees. This represents a reduction of approximately 9 percent of Cisco’s regular full-time workforce. All affected employees will receive severance pay and outplacement assistance.

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 are expected to occur at a later date in compliance with local laws and regulations.

Cisco also announced an agreement for sale of its set-top box manufacturing facility in Juarez, Mexico, to Taiwan-based Foxconn Technology Group. The approximately 5,000 people employed at the facility will become employees of Foxconn in the first quarter of fiscal 2012 and no job losses are expected as a result of the sale.

The 5,000 figure is in addition to the approximately 6,500 employees impacted by the reduction in workforce and the voluntary early retirement program. While this action is expected to create improvements to Cisco’s long term cost structure, the strategic intent for the sale is to simplify business operations.

Cisco assumed ownership of the Juarez facility with the acquisition of Scientific Atlanta in 2006. The facility manufactures video and telecommunications equipment for the service provider market.

Gary Moore, executive vice president and chief operating officer, Cisco, said in a statement, "Today’s announcement further simplifies and consolidates Cisco’s manufacturing operations. After working closely with Foxconn for many years, we know they are a strong strategic fit with Cisco’s long-term goals and are committed to a successful future in North America. We remain fully committed to our service provider customers and partners, and will continue investing in existing and new video platforms, including set-top-boxes, as part of our Videoscape vision."

The transaction is subject to regulatory approvals and is projected to close by October 2011.