Cisco plans massive job cuts, to simplify operations

Cisco Systems Inc, the world's largest maker of computer networking gear, on Wednesday announced plans to cut thousands of jobs in a cost-cutting exercise to get profits up again.

Though the company's sales rebounded from the recession, they stalled in the middle of last year and in the past few months. CEO John Chambers has signaled that he was accepting long-standing criticism that the company was playing in too many markets and has vowed to bring about a radical simplification of the company's operations.

The company is still not out of the woods and on Wednesday, it gave a financial forecast for the current quarter that fell well below analysts' expectations.

Chambers is now looking at a $1 billion cut, or around 6 per cent. Though he left out putting a number to the jobs he was aiming to cut, mostly through an early retirement programme, analysts say it could amount to 4,000 to 5,000 of the company's 73,400 employees.

The last time Cisco undertook a belt-tightening programme was two years ago at the height of the recession. At the time, the goal was to shave $1billion off annual expenses, which it did by cutting travel, freezing hiring and instituting a similar early retirement programme. It started re-hiring after it lost 2,000 employees.

Cisco, with a long history as a growth company, befitting its position as the leading provider of the equipment that powers the internet, has to live up to high expectations and Chambers has held on to a long-term goal of 12 per cent to 17 per cent annual revenue growth through the recession and its aftermath. He said he would provide a new target in September, as the goal was not reflective of the environment.
"We know what we have to do. We have a clear game plan," Chambers told analysts at a conference call. "We've had to make big changes before, and each time we've made these changes, we've emerged even stronger."