Cisco Systems, as part of a goal to lop off $1 billion in annual operating costs, will reduce its workforce by about 6,500 worldwide -- representing 9% of its full-time employees -- and also plans to sell its set-top box manufacturing facility in Juarez, Mexico, to electronics maker Foxconn Technology Group.
The layoffs include approximately 2,100 employees who elected to participate in a voluntary early retirement program, and Cisco noted the staff reductions include a total of approximately 15% of vice president-level and above employees.
In connection with the layoffs, Cisco estimates that it will recognize total pre-tax restructuring charges of not more than $1.3 billion over several quarters, comprising severance and other one-time termination benefits. 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 relating to the voluntary early retirement program. The remaining balance of the charges is expected to be recognized during fiscal 2012.
With Cisco's sale of the set-top box manufacturing facility to Foxconn, 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.
Cisco assumed ownership of the 5,000-person Juarez facility with the acquisition of Scientific Atlanta in 2006. The facility manufactures video and telecommunications equipment for the service provider market.
According to Cisco, the deal brings the company's video equipment manufacturing in line with its overall strategy of "partnering with world-class contract manufacturers to deliver the highest-quality products to customers." The transaction is subject to regulatory approvals and is projected to close by October 2011.
"Today's announcement further simplifies and consolidates Cisco's manufacturing operations," Cisco chief operating officer Gary Moore said in a statement. "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."