Cisco lays off 11,500 in $1bn cost-cutting drive

Cisco Systems is to cut 15 per cent of its staff and sell a set-top-box factory as part of a plan to cut annual expenses by $1bn (£620m) as the network equipment maker tries to revive its fortunes.

The company said 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. It 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," Morningstar analyst Grady Burkett said.

Cisco's global scale and a clientele spanning businesses and government agencies has made it one of the technology sector's bellwethers. The management's record of controlling costs and growing the business through acquisitions 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 reorganise 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 centres, switching and routing," Mr Burkett said.