An Update on Cisco's Action Plan
July 18 , 2011
Earlier this year Cisco outlined an action plan to maximize the strategic value of the network. To fully realize Cisco's potential we know we must make some very important operational changes and clearly define our network- centric strategy. We are moving quickly to focus our product portfolio, simplifying our operations (including significant cost reductions), and allocate our capital in the most productive way possible. An integral component of the plan is our goal to take out $1 billion in costs from our fiscal 2012 expense run rate, and part of that is obviously tied to the size of our workforce.
Today we announced further progress on our action plan.
- First, we announced the details of our global workforce reductions. We plan to reduce our global workforce by approximately 6,500 employees across all functions, which includes approximately 2,100 employees who elected to participate in a voluntary early retirement program. This also includes a reduction of executive-level staff (vice president and above) by approximately 15 percent. The reduction is approximately 9 percent of Cisco's regular full-time workforce. While these decisions do not come easily, we believe we have right-sized the organization and realigned our workforce to support our priority areas, while retaining the capabilities and talent to effectively support our long-term strategy. Our impacted employees will be treated with respect and receive appropriate severance benefits.
- Second, we have reached an agreement with Foxconn to take ownership of our 5,000-person manufacturing facility in Juarez, Mexico. This sale is an important step in simplifying our operations and brings our set top box manufacturing in line with Cisco's manufacturing strategy of partnering with world-class EMS (electronic manufacturing service) organizations. This is a clear opportunity to effectively manage our supply chain. While this action is expected to create improvements to our long term cost structure, our strategic intent for this action is to simplify our business operations and does not change our approach to the service provider market. Our service provider customers continue to require an integrated solution and although Cisco will no longer manufacture the boxes, we will continue to invest in existing and new video platforms, as well as advancing our next-generation platform, Videoscape, and set-top boxes. We will continue to drive innovation that helps our customers navigate the new opportunities in video, mobility, networks and cloud computing. .
As we execute on our action plan, we are looking at our portfolio from both a current and long-term market potential and return perspective. And we are moving quickly to sharpen our focus on a network-centric growth strategy. You will hear more details on our progress when we report Q4 earnings on August 10, 2011 and then again at our Financial Analyst Conference on September 13, 2011.
We are taking these broader steps to become more efficient and effective as we work to prioritize our strengths and assets. We are relentlessly focused on driving profitable growth and delivering value to our shareholders, and we believe we are on the right track to do so.
Thank you for your continued support.
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