Cisco to eliminate thousands of jobs in cost-cutting move

As companies endeavor to increase their profit margins amid pressure from shareholders, many are tightening their belts as they look to achieve business cost reductions. According to a published report, Cisco Systems may eliminate as many as 10,000 jobs as it strives to boost its profit margins.

Bloomberg reports that Cisco, which is one the world's biggest companies, could move to slash as many as 7,000 jobs by the end of August. While the plans are not final, sources told the news provider that the company is under pressure to revive its profit growth amid a stalling economic recovery.

The news comes as companies like Hewlett-Packard are increasingly taking market share from the technology giant in areas that were once its bread and butter, including networking and other communication software. In the fiscal year 2012, the job cuts could help the company to save more than $1 billion, the company said in May. As it moves to lay off the workers, however, it stands to lose an initial $500 million to $1.1 billion in its fourth fiscal quarter.

Cisco is offering the employees a voluntary retirement package that includes one year's pay and medical benefits, the sources said. That package was offered to about 5,800 employees. Some analysts have argued that Cisco should exit the consumer products sector completely, instead focusing its efforts on its lucrative enterprise offerings of switches and routers.

Gleacher & Co. analysts Brian Marshall affirmed that the company has lost market share to its competitors over the past few years and that the cost-cutting measures could help to improve its struggling profit growth.

"The revenue trajectory hasn’t been where it should be," he said. He recently rated the company's stock at "neutral," citing its relative weak performance over the past few months, as well as the rising competition it faces from companies like Juniper, which continue to eat into its business.

In April, Cisco closed its Flip video camera division in what the company said was a cost-cutting move. The 550 jobs it eliminated in that department may be the first of many to come in its consumer products division, accoding to analysts.