Cisco sheds jobs as it 'realigns' business

Layoffs include 250 workers at its headquarters as the company begins to restructure its business to focus on new areas of growth.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
2 min read

Technology stalwart Cisco Systems has begun "realigning" its workforce and has confirmed that it has started laying off workers this week.

The Wall Street Journal reported Thursday that Cisco, which sells Internet gear to communications service providers and large companies, has laid off about 250 employees at its headquarters in San Jose, Calif., this week. Other jobs in offices throughout the U.S. and overseas were also cut, the company said.

Cisco's job cuts come as other large technology companies have also laid off workers amid the deepening worldwide recession. Microsoft has already announced 5,000 job cuts over the next 18 months. And others like software maker SAP will cut about 3,000 people.

But Cisco insists these cuts are part of the company's normal course of business as it focuses on growth areas in the company.

"Cisco is constantly evaluating its business priorities, resources and overall employee alignment as part of our business management process," the company said in a statement. "This limited restructuring is part of our ongoing, targeted realignment of resources and was previously discussed on our fiscal second quarter 2009 earnings call."

CEO John Chambers said during the company's quarterly conference call earlier this month that the company would shed between 1,500 and 2,000 as it realigns the business.

Chambers insisted the company is not planning a major layoff, which he defined as cutting 10 percent or more of the company's workforce. Cisco currently employs about 67,000 people worldwide.

Like many technology companies, Cisco has been hit hard by the worldwide recession. Its revenue is slowing as its corporate customers and large communications service providers slow spending. In its second fiscal quarter, the company's revenue dipped by about 7.5 percent to $9.1 billion compared to the previous year.

And things are only going to get worse, Chambers warned. He expects sales to dip as much as 20 percent in the next quarter. That said, Chambers has also said that Cisco is well-positioned to emerge even stronger after the economic malaise. The company has been investing in new markets, such as consumer electronics and video for the past couple of years.

Instead of major workforce reductions to control costs, Cisco is focusing on reducing expenses by $1 billion by the end of fiscal year 2009. To achieve this goal it has taken a "pause" in hiring and reduced travel, offsite meetings, outside services, equipment, events, prototypes, marketing, and other activities.

One thing is clear, Cisco is in better financial position than many of its peers. In January it had about $29.5 billion in cash, and it just issued an additional $4 billion debt to help fund acquisitions.