Cisco formally announced it will be laying off over 4,000 employees, for a total worldwide workforce reduction of 6,500 jobs following the voluntary early retirement of about 2,100 employees. This action was expected and is part of the company’s previously stated goal of reducing its annual operating expenses by $1 billion.

Additionally, Cisco agreed a sale of its set-top box manufacturing facility in Juarez, Mexico, to Foxconn Technology Group. This will result in 5,000 other Cisco employees becoming Foxconn employees, but neither company expects any job losses. This transition will take place in the first quarter of fiscal 2012.

“While this action is expected to create improvements to Cisco’s long term cost structure, the strategic intent for this action is to simplify business operations,” the company said in its July 18 statement.

The staff reductions span across Cisco’s operations and represent about 9 percent of the company’s full-time workforce. Cisco pointed out that this figure factors in an approximately 15 percent cut in job levels of vice president and above.

In connection with this plan, Cisco estimates that it will recognize total pre-tax restructuring charges to its GAAP financial results in an amount not expected to exceed $1.3 billion over several quarters, consisting of severance and other one-time termination benefits.  Substantially all of these charges are cash-based.  Cisco 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.

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