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July 20, 2011

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Cisco unveils measures to save US$1b

CISCO Systems plans to cut 15 percent of its staff and sell a set-top box factory to cut annual expenses by US$1 billion as the network equipment maker tries to revive its fortunes.

The company said on Monday that 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 at the end of last quarter, a spokeswoman said. Cisco will transfer 5,000 to Taiwan-based 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," said Morningstar analyst Grady Burkett.

The announcement came on the same day that Borders Group Inc, the second-largest United States bookstore chain, canceled its bankruptcy auction plans and said it would close for good. Nearly 11,000 people will lose their jobs.

Cisco's global scale and a clientele spanning businesses and government agencies have made it one of the technology sector's bellwethers.

The management team's record of controlling costs and growing the business through acquisitions also made them a darling of tech investors over the years. But a fragile global economy proved more damaging than initially expected.

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