8-KFinancial Events

CISCO SYSTEMS, INC. 8-K Report, Exit or Disposal Costs (Jul 18, 2011)

Filed July 18, 2011For Securities:CSCO

Summary

Cisco Systems, Inc. (CSCO) filed an 8-K on July 18, 2011, announcing a significant workforce reduction plan aimed at reducing annual operating expenses by $1 billion. The company plans to eliminate approximately 6,500 global employees, which represents about 9% of its regular full-time workforce. This reduction includes an estimated 2,100 employees who opted for a voluntary early retirement program. Cisco anticipates recognizing pre-tax restructuring charges not exceeding $1.3 billion related to these layoffs, with the majority being cash-based. A substantial portion, approximately $750 million, is expected to be recorded in the fourth quarter of fiscal year 2011, with the remainder recognized in fiscal year 2012. Investors should monitor these charges as they impact near-term profitability, though the long-term goal is improved operational efficiency and cost savings.

Key Highlights

  • 1Cisco announced a workforce reduction of approximately 6,500 employees, representing about 9% of its global workforce.
  • 2The reduction is part of a broader initiative to achieve $1 billion in annual operating expense reductions.
  • 3Approximately 2,100 employees will participate in a voluntary early retirement program.
  • 4The company expects to incur pre-tax restructuring charges of up to $1.3 billion, primarily for severance and termination benefits.
  • 5A significant portion of the charges ($750 million) is expected in Q4 FY2011, with the rest in FY2012.
  • 6The charges are substantially cash-based.
  • 7Cisco anticipates further restructuring charges as part of its ongoing simplification and operational refinement efforts.

Frequently Asked Questions

The primary reason is to reduce annual operating expenses by $1 billion as part of a comprehensive action plan to simplify the organization and refine operations.

Approximately 6,500 employees worldwide will be affected, which constitutes about 9% of Cisco's regular full-time workforce. This includes about 2,100 employees who opted for a voluntary early retirement program.

Cisco expects to recognize pre-tax restructuring charges of up to $1.3 billion, mostly cash-based, related to severance and termination benefits. A significant portion ($750 million) is expected in Q4 FY2011, with the remainder in FY2012, which will impact reported earnings in these periods.

Impacted employees in the United States, Canada, and select countries are expected to be notified during the first week of August 2011. Reductions in other global locations will occur later, in compliance with local laws.