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Edition: U.S. Article Comments (1) Follow Reuters Facebook Twitter RSS YouTube Read Universal pulls plug on Stephen King's "The Dark Tower" 18 Jul 2011 News of the World Whisteblower Found Dead 18 Jul 2011 Minnesota grinds budget details to end shutdown 18 Jul 2011 Special report: Banks continue robo-signing 18 Jul 2011 Perry signs bill allowing Texas healthcare "compact" 18 Jul 2011 Discussed 101 Obama asks lawmakers to gauge support for debt deal 60 Fallback plan gains momentum in debt talks 60 Obama eyes more deficit talks with no deal in sight Watched Flying sphere goes where man fears to tread Thu, Jul 14 2011 Pakistan Taliban releases video of mass execution Mon, Jul 18 2011 Japan's winning team returns home Mon, Jul 18 2011 Cisco to cut workforce by 15 percent, sell factory to Hon Hai Tweet Share this Email Print Related News Cisco to cut workforce by 15 percent, sell factory Mon, Jul 18 2011 Special report: New Mexican TV probe hits embattled Slim Tue, Jul 12 2011 Australia unveils sweeping carbon plan in climate fight Sun, Jul 10 2011 Dismal jobs picture complicates debt talks Fri, Jul 8 2011 Instant view: Jobs growth slows in June Fri, Jul 8 2011 Analysis & Opinion Would the GOP’s ‘Cut, Cap and Balance’ plan really cost 700,000 jobs? How the cloud changed venture capitalism Related Topics Technology » iPad » The Cisco logo is displayed at the technology company's campus in San Jose, California February 3, 2010. Credit: Reuters/Robert Galbraith By Sinead Carew and Poornima Gupta NEW YORK/SAN FRANCISCO | Tue Jul 19, 2011 12:48am EDT NEW YORK/SAN FRANCISCO (Reuters) - Cisco Systems plans to cut 15 percent of its staff and sell a set-top box factory as part of a plan to cut annual expenses by $1 billion as the network equipment maker tries to revive its fortunes. The company said on Monday that it will cut 11,500 jobs, compared with the several thousand that analysts had predicted. The cuts come after Cisco's chief executive John Chambers said in April that the company had "lost its way." Cisco had 73,408 employees as of the end of the last quarter, a spokeswoman said. Cisco will transfer 5,000 to Taiwan's Hon Hai Precision Industry, which will buy the set-top box plant in Juarez, Mexico. Of the other 6,500 who are leaving, 2,100 will take early retirement. "This is a net positive for the company and for investors," said Morningstar analyst Grady Burkett. The announcement came on the same day that Borders Group Inc, the second-largest U.S. bookstore chain, canceled its bankruptcy auction plans and said it would close for good. Nearly 11,000 people will lose their jobs. Cisco's global scale and a clientele spanning businesses and government agencies has made it one of the technology sector's bellwethers. The management team's record of controlling costs and growing the business through acquisitions also made them a darling of tech investors over the years. But a fragile global economy proved more damaging than initially expected. Cisco said in May that it would reorganize after losing ground in the network equipment business. "We still need clarity around what different businesses the cuts are coming from, but Cisco has been very vocal about the fact that they are refocusing on their core businesses such as data centers, switching and routing," Burkett said. The job cuts will result in pre-tax restructuring charges of as high as $1.3 billion over several quarters. Cisco expects to incur about $750 million of the charges in the fourth quarter of its fiscal year 2011, including $500 million for the early retirement program. It did not say how close the cutbacks would bring it toward its goal of reducing annual costs by $1 billion. About 15 percent of Cisco executives at the level of vice president and higher will lose their jobs too. Cisco will notify U.S. and Canada-based employees who are losing their jobs in the first week of August. The layoffs in other countries will take place later in compliance with local laws and regulations, Cisco said. FACTORY SALE The sale of the Juarez factory is in line with company strategy, said Cisco spokeswoman Karen Tillman. Cisco outsources about 90 percent of its manufacturing to contract manufacturers. Hon Hai is the flagship listed unit of the Foxconn group, which is best known for making Apple Inc's iPhones and iPads. Its various business units also make products for companies including Hewlett Packard and Dell. It is seeking to transform itself into a technology firm and move away from the low-margin contract manufacturing. It has bought LCD TV plants from Japan's Sony Corp in Mexico in 2009 and Slovakia in 2010 and is in cooperation talks with a number of top Japanese hi-tech firms, including Sharp, Canon and Hitachi. Some investors are betting the purchase of the Mexico plant would guarantee orders and bring in strong margins. "It is not clear about the operation's scale, but set-top box makers usually get a gross margin of over 10 percent and that is not bad in the tech industry," said Bevan Yeh, a fund manager at Prudential Financial in Taiwan. Foxconn also said in April it was considering more investment in Brazil, a move analysts said could be linked to Apple's plans to target the growing Brazilian market. Foxconn already makes mobile phone handsets in Brazil. Shares in Hon Hai were up 0.23 percent by 0409 GMT in a broader market down 0.1 percent. "I suspect Hon Hai doesn't need to pay much for the plant because factories depreciate very quickly; in the contract it may also get to secure future orders from Cisco," said Vincent Chen, Yuanta Securities' head of downstream technology analysis. "It can use the plant to manufacture for other clients too such as Alcatel." The Foxconn group, which employs close to a million workers in China, made headlines last year after reports emerged about poor working conditions at factories in southern China, which critics say may have helped drive several employees to suicide. (Additional reporting by Clare Jim and Faith Hung in TAIPEI; Writing by Robert MacMillan; Editing by Jonathan Standing and Anshuman Daga) Technology iPad Related Quotes and News Company Price Related News Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (1) truth2power wrote: Gee…layoffs, company strategy, outsourcing, the selling of yet more American manufacturing and technology to a Chinese company…all leading to a weakening of workers rights, poor working conditions worldwide and the enslavement of the lower classes. If you watch the news carefully, the suicides have already started across the United States with whole families being slaughtered by the breadwinner who can no longer provide. All while our politicians continue their partisan posturing and top executives bail out with their golden parachutes. Jul 19, 2011 2:32am EDT -- Report as abuse See All Comments » Add Your Comment Social Stream (What's this?) © Copyright 2011 Thomson Reuters Editorial Editions: Africa Arabic Argentina Brazil Canada China France Germany India Italy Japan Latin America Mexico Russia Spain United Kingdom United States Reuters Contact Us Advertise With Us Help Journalism Handbook Archive Site Index Video Index Reader Feedback Mobile Newsletters RSS Podcasts Widgets Your View Analyst Research Thomson Reuters Copyright Disclaimer Privacy Professional Products Professional Products Support Financial Products About Thomson Reuters Careers Online Products Acquisitions Monthly Buyouts Venture Capital Journal International Financing Review Project Finance International PEhub.com PE Week FindLaw Super Lawyers Attorney Rating Service Reuters on Facebook Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. 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