Cisco Systems Inc. (Nasdaq: CSCO) today announced a broad cost-cutting plan that includes laying off at least ten percent of its workforce (see
Cisco Announces Major Cuts).
The networking giant will eliminate 2,500 to 3,000 temporary and contract workers and cut 3,000 to 5,000 regular employees through "voluntary attrition, involuntary attrition," and consolidation.
Cisco expects to take a one-time charge of $300 million to $400 million by the end of the fourth quarter of fiscal 2001 to account for the workforce reduction.
Cisco CEO John Chambers said in a prepared statement that the actions were taken as a precaution, following signs of economic slowdown in the United States and other parts of the world.
The company also plans to cut costs in contract services, travel, and marketing expenses.
The company has roughly 44,000 regular employees. Although Cisco normally cuts about five percent of its workforce annually through a "performance management" program, more jobs are being cut this year than is usual, said a Cisco spokeswoman.
Analysts were not surprised by the action, give the recent earnings warnings and general slowdown in the U.S. economy.
"The cuts are not unexpected and should probably be seen as a fairly healthy culling of the weak and the lame from the herd,"
said Stephen Kamman, an analyst with
CIBC World Markets. "The price of success for a big growth stock is that you'll someday grow big enough that you'll have to start doing what normal companies do."
-- R. Scott Raynovich, executive editor,
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