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Cisco to shed 14 percent of workforce

Networking equipment maker plans layoffs and sale of factory in Mexico in effort to save $1 billion annually.

Cisco Systems announced today it would cut about 14 percent of its global workforce, or about 11,500 employees, as part of a widely expected reorganization.

The network-gear maker expects to save $1 billion a year by eliminating 6,500 jobs, including 2,100 employees who opted to participate in an early retirement program. The cuts, which were greater than the rumored figure circulating last week, include a 15 percent reduction in employees at the vice president level or higher, the company said.

The San Jose, Calif.-based company also plans to eliminate about 5,000 jobs by selling its set-top box manufacturing facility in Juarez, Mexico, to Foxconn. Cisco said employees at the Mexico plant would become Foxconn employees in the first quarter of 2012 and that no job cuts were expected at the facility as a result of the sale.

Cisco said it will take a one-time charge of $1.3 billion to cover the costs of the reorganization.

The company announced its intention to cut jobs to combat its ailing fortunes during its third-quarter earnings report in May. "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.

The company has had poor luck trying to moving into 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.

But as Cisco moved into new markets, sales in its core businesses slowed and Cisco lost market share. While Cisco still dominates in the IP routing market, it has been more challenged in its Ethernet switching business at the hands of rivals such as Hewlett-Packard and Chinese manufacturers such as Huawei.