Less is more
Cisco is reportedly planning to cut as many as 10,000 of its staff (about 14 per cent of its workforce), in an attempt to take the company to improve the company's profitability. According to Bloomberg, sources at Cisco indicate that a reduction in the company's workforce will come alongside its reducing its product portfolio, in order to secure its position against increased competition in its core business areas.
As many as 7,000 cuts might come as soon as August, with a large number of the employees leaving Cisco opting to take early retirement - of about 5,800 employees offered the option to have their contracts terminated early, around 3,000 are said to have accepted the offer. Although the downsizing process could cost Cisco between $500 million and $1.1 billion, in its fourth quarter, the cost savings are estimated at $1 billion in the next financial year.
Although these reductions in expenditure alone won't improve Cisco's profits, if the reduced workforce is able to fulfil Cisco's desire to consolidate its efforts into fewer product areas, it could prove a worthwhile sacrifice. Combined with plans for an organisational restructure, and a renewed focus on growing areas of its business, however, a cut back workforce could well help Cisco on its way to greater profits.
The full details of the Cisco's headcount reduction will be revealed in an earnings call on 10 August, although it will of course be a while longer before the measures Cisco plans to take are proved successful, or not.
