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Analyst: Cisco May Cut 5,000 Jobs Soon

The networking gear maker said the move is "required in order to maintain the 'competitiveness'" by reducing costs and increasing the bottom line.

NEW YORK (AP) -- Networking gear maker Cisco Systems Inc. may cut about 5,000 jobs in August in one of its largest work force reductions, Gleacher & Co. analyst Brian Marshall said on Monday.

Marshall said that while difficult, the move is "required in order to maintain the 'competitiveness'" of Cisco going forward. Cutting 5,000 jobs would mean a nearly 7 percent work force reduction for Cisco, which has about 73,400 employees worldwide. Marshall said the reduction would be similar to large job cuts the company had in 2001 and in 2002.

Cisco said in May that it's set to eliminate thousands of jobs as part of its broader plan to cut costs and increase profits. CEO John Chambers said he wants to cut annual expenses by $1 billion, or about 6 percent. He did not say how many jobs the company was planning to cut, mainly through an early retirement program.

Cisco spokeswoman Kristin Carvell said the company will provide more details on cost cuts, including layoffs, when it announces quarterly earnings Aug. 10.

Marshall said this would be the third major initiative of Cisco's restructuring program in the past six months. The company restructured its consumer business in April, killing off its Flip video camcorder business. In May, it reorganized its management structure.

"While we view this as positive, we need the company to reset its long-term financial targets," wrote Marshall, who rates Cisco's shares "Neutral" with a target price of $17. A fourth and "necessary step," he said, would be a formal lowering of Cisco's financial targets. Cisco currently expects annual revenue to grow by 12 percent to 17 percent.

Shares of San Jose, Calif.-based Cisco fell 33 cents, or 2.1 percent, to $15.41 in afternoon trading. The stock has traded in the 52-week range of $14.78 to $26.

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