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Cisco investing up to $1.35B in Mexico; more on JPMorgan's downgrade

  • A month after announcing it will invest up to $4B in Ontario over the next ten years, Cisco (CSCO -0.7%) says it will directly and indirectly invest up to $1.35B in Mexico.
  • The spending will be tied in large part to the expansion of product sourcing in Mexico via contract manufacturers, and the development of a local support center. Though Cisco only has 600 employees in Mexico, manufacturing partners have over 5,800 dedicated to making Cisco hardware.
  • Back in August, Cisco announced it's cutting 4K jobs (5.5% of its workforce) globally.
  • Meanwhile, JPMorgan's Rod Hall, who has downgraded shares to Underweight, says he's worried about emerging markets weakness, along with delays in switch purchases caused by the adoption of software-defined networking (SDN).
  • Cisco saw a 12% Y/Y drop in emerging markets orders in its Oct. quarter (thanks in part to NSA-fueled China weakness), and John Chambers stated last month emerging markets remain "extremely challenged," even as the U.S. shows signs of improvement.
  • SDN growth is viewed as a long-term threat to Cisco, but major enterprise uptake isn't expected before 2015, and major carrier uptake could take longer still.
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