Shares of Cisco Systems, Inc. (NASDAQ:CSCO) are up about 0.5% after the company announced late Monday that it was cutting 6,500 jobs, or 9% of its workforce. Analysts welcomed the news, while painful, are necessary steps for the company to get back on track. Here’s what Rohit Chopra, a Wedbush analyst, had to say about this move, “The cuts are drastic and could have a near-term negative impact, especially on morale. However, we see this as an important long-term adjustment to a business model which had little leverage and was in danger of becoming less competitive.” Other analysts stressed that Cisco must show a path to stronger growth to remain competitive in the tech sector.
About a third of the cut workers are taking part in a voluntary early retirement program. Regular workers weren’t the only ones affected either as the cuts also reduced employees at the vice president or higher by 15%. The company also moved 5,000 jobs to Foxconn Technology Group after selling its manufacturing facility for set-top boxes in Mexico.
These job cuts are part of a bigger initiative that Cisco launched earlier this year aimed at reducing annual costs by $1 billion and becoming a more competitive company. A few months ago, Cisco shut down its Flip video-camera business as it continues to simplify its business.