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Cisco Announces $4B Mexico Investment

Karla Salinas | 12.10.2016

This investment will work to bolster output of Mexican-made products ranging from routers, servers, switches and wireless access points.

Global networking giant Cisco Systems Inc. charges ahead with a $4 billion plan to expand into Mexico between now and 2018, reports Reuters. The news comes Tuesday after a meeting between Cisco’s Chief Executive Chuck Robbins and Mexican President Enrique Pena Nieto.

U.S. Companies Funnel Capital into Mexico

The San Jose, Calif.-based company’s $4 billion investment in Mexico will work to bolster output of Mexican-made products ranging from routers, servers, switches and wireless access points. Alongside the production boost, the investment will help create 270 jobs and 77 indirect jobs while affecting 4,830 direct employees in Mexico, as indicated by the Mexican government. The $4 billion figure includes previously planned spending in the region alongside new contracts with manufacturers rather than investing in factories.

Cisco isn’t the only big U.S. player looking to Mexico for growth. Ford Motor Co.  announced a $1.6 billion investment to develop a car factory in Mexico earlier this year. AT&T Inc. has also shifted focus to Mexico after spending $4.4 billion to acquire Iusacell and Nextel Mexico, pledging to invest another $3 billion to expand mobile internet service in Mexico.

Mexican Venture Part of Cisco’s Larger 2016 Turnaround

News of Cisco’s Mexican investment comes as the legacy hardware provider aggressively seeks new growth prospects for a 2016 turnaround in light of slowing hardware sales. A major companywide cost-cutting initiative will trim 7% of Cisco’s workforce, amounting to about 5,500 job cuts, to invest in newer businesses expected to fuel sales growth. As the company shifts focus to develop cloud capabilities, enterprise security, collaboration software and subscription-based services, it looks abroad to keep costs down in its core hardware production business.

Cisco’s stock jumped a couple percentage points following the Mexican government’s announcement of the deal, slightly cooling down at its current share price of $31.42. 

Source: Investopedia

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