Cisco Sets Up Manufacturing Unit as Part of India Push

India is 12th country to house Cisco production unit outside the U.S.

c1Global networking giant Cisco Systems Inc. (NASDAQ: CSCO), as part of its “Digital India” initiatives, announced the launch of its manufacturing operations in Pune, Maharashtra, on October 13th, 2016. Cisco will use the manufacturing unit to produce and ship orders for customers in India as well as for testing, development, logistics and in-house repair capabilities for products including routers, switches and various circuit boards from early 2017. The setting up of the Pune unit would make India the 12th country to house a production unit after the U.S., Mexico, China, Brazil, and Malaysia, among others. The Company also announced that it would transform Nagpur in Maharashtra as Smart City with its Next-Gen solutions, under which Cisco will enable city-wide network connectivity, smart and secure Wi-Fi hotspots and smart safety and surveillance solutions.

c2Cisco also announced plans to establish up to 25 Cisco Networking Academies to train approximately 10,000 students in Maharashtra by 2020. The company has also announced the expansion of the Cisco Networking Academy program and digital education and healthcare initiatives in Nagpur. The company will also collaborate on the state-wide rollout of broadband infrastructure to accelerate the Digital Maharashtra vision.

Cisco joins the list of technology majors such as Alphabet Inc.’s (NASDAQ: GOOG) Google and Facebook Inc. (NASDAQ: FB) that have come up with an India-focused strategy. Facebook is testing an affordable Wi-Fi service called Express Wi-Fi in rural India, allowing users to buy data packages from local internet service providers (ISPs) to access the internet via local hotspots. In the same vein, Google has launched products like Google Station and YouTube Go to make it easier for Indians to get connected to the internet faster and better. Google also plans to launch of a public Wireless Fidelity (Wi-Fi) platform called Google Station, a service that aims to offer free and secure Wi-Fi in public places across the country.

Cisco crosses $1 billion in revenues from India operations

Cisco, which set up operations in India in 1995, currently employs around 11,000 employees in India. India is all set to become one of the top four markets for Cisco over the next few years, having earned over $1 billion in revenues already, having grown at a rate of 20% in 2015. The growth can be attributed to a strong growth in government and enterprise business. Apart from India, the San Jose-based firm’s other leading markets include the U.S., China, and Japan.

Earlier in 2016, Cisco had committed $100 million to be spent over next two years, including $40 million to fund early and growth stage companies in the country. In addition, the funding would be utilized to train around 2.5 lakh student over the next four years.

Q4 FY16 financial highlights

Cisco reported its Q4 FY16 earnings results on August 17th, 2016. The Company’s global revenue was at $12.64 billion, a decline of 2% compared to the year-ago period. However, Cisco’s India operations witnessed a robust topline growth of 20%, topping nine straight quarters of growth starting from Q4 FY14. The Company reported earnings of $0.63 per share, beating expectations for $0.60 per share during the reporting quarter.

Cisco to slash 7% of its workforce

c3Cisco also announced on August 17th, 2016, that it plans to cut up to 5,500 positions, or about 7% of its global workforce, beginning Q1 FY17. Cisco joins other major Silicon Valley companies that are trimming their manpower in response to customers shifting to the cloud and coping with the need to accelerate process in light of a transforming market. Cisco said that it expects to reinvest the cost savings from its restructuring plan into key areas such as security, Internet of Things (IoT), collaboration, next generation data center and cloud in order to enhance shareholder value.

Recent acquisitions

c4As part of its cloud focus, Cisco strengthened its security services unit with the acquisition of CloudLock for $293 million (£220 million) on June 28th, 2016. CloudLock specializes in cloud access security tech, offering enterprises analytics on user behavior and sensitive data for cloud services, including software as a service (SaaS), infrastructure as a service (IaaS) and platform as a service (PaaS). The acquisition is expected to close in Q1 FY17, when the CloudLock team will join Cisco’s Networking and Security Business Group under Senior VP and General Manager David Goeckeler.

The acquisition of CloudLock is expected to boost security for companies seeking to migrate to the cloud. The acquisition of the Massachusetts-based startup is just the latest in Cisco’s buying spree of cloudy security outfits. In 2015, Cisco acquired U.S.-based Lancope for $452 million (£340 million); U.K.-based Portcullis Computer Security for an undisclosed sum; and U.S.-based OpenDNS for $635 million (£476 million).

Stock Performance

c5Cisco’s stock stood at $30.22, gaining 0.13%, at the close on Monday, October 17th, 2016, having vacillated between an intraday high of $30.42 and a low of $30.10 during the session. The stock’s trading volume was at 13,956,806 for the day. The Company’s market cap was at $151.48 billion as of Monday’s close.

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