Cisco Confirms Global Job Cuts

Cisco would not confirm on Wednesday how many positions were cut. Sources, however, said employees started receiving notifications on Tuesday, and roughly 250 of the positions eliminated were based in San Jose, Calif. Overall, sources said, the number of employees affected was fewer than the 1,500 to 2,000 that Cisco CEO John Chambers hinted at on the company's earnings call for the second fiscal quarter.

According to the networking giant, the staff reduction is part of the "limited restructuring" process Chambers previously alluded to.

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

During the Feb. 4 earnings call, Chambers shied away from calling potential job cuts layoffs.

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"Also in the spirit of complete openness, we are constantly realigning and restructuring resources as a part of our normal business process," Chambers said on the call. "As an example, in fiscal year 2008 and the first quarter in 2009, we realigned and restructured approximately 1,000 jobs of a global workforce of 67,000 employees. With the speed that we are moving on so many fronts, we will continue this normal process, which in the near term could result in the reduction of 1,500 to 2,000 jobs. This is something we will continue to do both in good and challenging times, but thought it was important to provide this level of detail, especially to our employee family during these uncertain times."

Chambers added that Cisco defines a layoff as a "critical mass to justify the loss of business momentum, impact on employees and disruption in key projects." He said he considers a company-wide layoff as at least 10 percent of the workforce.

"In very direct terms, we are not going to consider a layoff at this point in time," Chambers said on the call. "While there are no guarantees, we think the odds are reasonable that if we execute effectively as outlined on this call, we may be able to avoid large downsizing events."

Sources told that some of the affected employees could be redeployed to other areas within Cisco. Those that are not redeployed will receive a separation package that includes severance pay and job-transition assistance.

This week's job cuts come after normally resilient Cisco's revenue dropped 7.5 percent year over year to $9.1 billion for the second quarter. Coming off the down quarter, Chambers said Cisco expects third fiscal quarter revenue to drop between 15 and 20 percent year over year, prompting him to call the current economic state "The biggest challenge of our lifetime."

Cisco has vowed to continue its aggressive cost-cutting initiative, which Chambers said will reduce operating expenses by $1 billion by the end of fiscal 2009. Along with job cuts and resource realignment, other cost-cutting initiatives within Cisco include a hiring freeze and a sweeping reduction in corporate travel.