Cisco to take $700 million in restructuring charges for layoffs

Thu Aug 14, 2014 12:47pm EDT
 
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By Marina Lopes and Soham Chatterjee

(Reuters) - Network equipment maker Cisco Systems Inc said on Thursday its plan to slash 6,000 jobs will result in restructuring charges of $700 million in cash in the year ending July 2015.

The latest round of layoffs, announced on Wednesday, is at least the fourth workforce reduction in about as many years for a company once synonymous with the Internet boom and could spark a shakeup in management, analysts said.

Shares in Cisco, still the world's largest networking equipment maker, were down 2.7 percent at $24.52 on the Nasdaq.

Cisco has failed to sustain growth in its high-end switches and routers business and is grappling with competition from so-called software-defined networks (SDN) which offer software that can run on cheap hardware.

The company will recognize $250 million to $350 million of the charges in the first quarter, it said in a regulatory filing.

John Chambers, Cisco's veteran chief executive, blamed the cuts on global uncertainty and said he will use the savings to reinvest in profitable sectors like cloud computing and security.

While the company has cut over 17,000 in the past four years, acquisitions have helped its headcount grow to around 74,000 from 71,000 in 2011, according to Cisco's regulatory filings.

"He is right-sizing Cisco and trying to get some strategic changes put in place. In the interim he has got to maintain his margins," said Ken Dulaney, analyst at Gartner.   Continued...

 
A sign marking a Cisco office is pictured in San Diego, California November 12, 2012.  REUTERS/Mike Blake