Cisco may need to shed 5000 jobs: analyst

Marriage with EMC could make sense.

Cisco could be forced to shed 5000 jobs in order to maintain its competitiveness, according to a researcher at a US investment bank.

The cuts would represent seven percent of Cisco’s 73,000 workforce and would lower its expenses by US$1 billion annually, according to a widely reported research note by Gleacher & Co analyst Brian Marshall.

In addition to cost cutting measures, Marshall also pointed to the sense of a merger between Cisco and its long time partner, storage vendor EMC, which would help to strengthen both companies' offerings around data centre and cloud solutions.

Cisco intends to shed light “on the cost reductions, including layoffs” in its August 10 earnings call, spokeswoman Karen Tillman told Bloomberg. 

In May analysts were expecting Cisco to cut up to 4000 jobs -- its largest cuts since 2002, after the April 2001 tech wreck.

However, unlike previous layoffs, Cisco does not face a collapse in stock valuations, but rather mounting pressure from rivals, such as HP and Juniper Networks, and video-conferencing rivals such as Polycom.  

HP today boasted the 2.5 per cent gains it made in Layer 2 and 3 Ethernet switching revenue in the first quarter of 2011 at a time when Cisco’s share fell 5.8 percent. For its part, Juniper Networks continues to enjoy stellar growth as it challenges Cisco in key markets.