Network-gear maker and onetime Wall Street darling Cisco Systems may cut as many as 10,000 jobs, or about 14 percent of its workforce, as it struggles to get back on track amid competition from Hewlett-Packard and others, according to a report today.
As many as 7,000 jobs could be cut by the end of next month, and another 3,000 positions will be eliminated by way of early-retirement packages, according to a Bloomberg story, which cites a pair of anonymous sources.
During its third-quarter earnings report in May, Cisco said it would be cutting staff to address its ailing fortunes.
"The decision to include headcount reduction of our full-time and contractor workforce as a way of reducing expense is difficult," Cisco COO Gary Moore said at the time (as reported by CNET sister site ZDNet). "It is not something we take lightly, and we will communicate exactly what these decisions mean to our employees by the end of summer."
Despite dominating its core market of IP routing and switching for more than 20 years, and despite CEO John Chambers' longtime reputation as a managerial wizard, Cisco has recently seen its main businesses slow as it has moved into new markets. Its Ethernet switching business, in particular, has suffered at the hands of rivals such as Hewlett-Packard and Chinese manufacturers such as Huawei.
The company has also had bad luck with its efforts in the consumer space, and in a disappointing move for some, recently killed the Flip camcorder to focus its attention on its bread-and-butter networking business.
"Investors were losing confidence," Yankee Group analyst Zeus Kerravala told CNET's Maggie Reardon at the time of the Flip announcement. "I don't remember a time when what John Chambers said was not considered gospel by Wall Street. Now he must restore confidence. So it may be that desperate times call for desperate measures."
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During the third-quarter earnings report, Chambers predicted weakness in what is now the current quarter and commented on the tough choices the company was making.
"Q4 will continue to show weakness while we do the hard work behind the scenes to be able to execute these changes, and we will provide for Q4 guidance that reflects that lag," Chambers said. "We know what we have to do. We have a clear game plan."
Cisco said in May that its planned job cuts would help trim $1 billion in expenses in fiscal 2012, according to today's Bloomberg report, which also said Cisco expects costs of $500 million to $1.1 billion in the fiscal fourth quarter as a result of the voluntary early-retirement program. The retirement packages included one year's pay and medical benefits, and were offered to about 5,800 employees, Bloomberg reported.
A Cisco representative would not give Bloomberg specifics about the number of job cuts, saying only that Cisco would provide details on its cost reductions, including layoffs, during its next earnings call, which is scheduled for early next month.