Cisco could axe 10,000 employees to trim costs

Cisco (Nasdaq: CSCO) may be chopping about 10,000 positions across the company as it struggles to regain profitability after swallowing a number other businesses.

People close to the situation said out of that Cisco would cut 7,000 positions by the end of August and then provide early retirement packages to about 3,000 employees.  

A previous Bloomberg article citing a Gleacher & Co. research report estimated that Cisco would cut about 5,000 employees. Most likely, the job cuts will come in its consumer business. Already, the company shuttered its Flip camera business in April and rumors have emerged that it would sell off its Linksys home router business.

By making these changes, Cisco believes it will be able to save $1 billion in fiscal 2012. In a quarterly filing, Cisco said it expects to pay $500 million to $1 billion in fiscal fourth quarter costs for early retirement packages.

Not surprisingly, Cisco is being tight lipped about its plans. "We will provide additional detail on the cost reductions, including layoffs, on our next earnings call," Karen Tillman, a spokeswoman for Cisco, said.

Analysts and investors alike believe that Cisco should sell off its consumer units and refocus its attention on advancing its enterprise and service provider routing and switching business, one where it has lost market share to rivals like Alcatel-Lucent (NYSE: ALU) and Juniper Networks (NYSE: JNPR). According to a recent Dell'Oro report, Cisco's global routing market share slipped 6.4 percentage points to 54.2 of the overall market, while Juniper gained market share.

All of these changes are part of a broader effort by John Chambers, Cisco's CEO and Chairman, who announced in April that it would be making a number of sweeping changes to the company's structure to regain profitability and credibility, including the realignment of its management structure.

For more:
- Bloomberg has this article
- Here's FierceEnterpriseCommunications' take

Related articles:
John Chambers, Cisco: Wireline's most powerful people
Cisco's Chambers plans to overhaul company focus
Cisco needs to put focus back on its routing business, say analysts

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