Just about everywhere you turn today, you’ll find someone saying something bad about Cisco. The company’s recent decision to lay off 6,500 employees and sell off a manufacturing plant where it had 5,000 employees has only served to pump up the volume on the chorus of critics who say that Cisco’s best days are behind it, and it might be trounced by a competitor. Admittedly, when one looks at where things stand right now, it’s not difficult to jump to that conclusion. Cisco seems like it’s in disarray, and the company’s management has done little quell unrest on Wall Street. Even worse, corporate users are unsure where the company is headed in the future, causing them to rethink their roadmaps. In many ways, it’s a nightmare scenario for Cisco. But before the alarms are sounded, it’s important to point out that it’s not all bad. Cisco is taking action to fix things, and it has apparently changed up its strategy to more effectively focus on the enterprise market. And in the coming years, all those critics might just find a company in Cisco that’s bigger and better than ever.
Here’s a look at why Cisco might be down, but it’s certainly not out.
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Companies Grow From Adversity
History shows that in the technology industry companies tend to grow from adversity as long as they have a solid foundation of products. Cisco has that, especially in its router and switching business. It wasn’t long ago that another company— Apple—was in an even more difficult position and overcame adversity. Maybe Cisco can follow suit.
It Understands Its Core Competencies
Cisco has spent quite a while trying to expand out from its core competencies. The company prospecting in too many markets and along the way it forgot about what it does best. Cisco’s restructuring and layoffs announcement acknowledges Cisco’s refocus on what’s important. And that could prove to be the foundation for its future.
The Cius Isn’t A Bad Idea
Some have criticized Cisco for pursuing the tablet market with its Cius. But the reality is, the device could very well be a winner. Enterprise users are looking for tablets, and many IT decision-makers are unwilling to adopt the iPad. If the Cius can offer the right balance of functionality and price, it might just find a suitable home in the corporate world.
The Financials Are There
All the discussions on Cisco’s supposed demise seem to ignore that the company is still financially sound. During the last quarter ended April 30, Cisco generated a profit of $1.8 billion on revenue of $10.8 billion. Although it faces troubles, Cisco is still financially sound.
Wall Street Hasn’t Bailed YetThere’s no debating that Cisco’s stock price has plummeted in the last year. In fact, according to Google Finance data, its shares are down over 31 percent in the past 12 months. But Wall Street hasn’t bailed entirely. And in the last month, Cisco’s stock is up 4.49 percent. Investors are still seeing value in Cisco, and that’s a good thing for the company.
Layoffs Can Be Good For A Company
There are two ways to look at layoffs. Some say that layoffs are an indication that trouble is afoot and more issues will arise in the coming weeks, months, and years. However, others \ find layoffs to be a valid cost-cutting method to get a company back on track. It’s never good when employees are cut, but if Cisco wants a more financially sound future, it was a necessary step.
IT Still Trusts Cisco
There are many IT decision makers out there who are concerned about Cisco’s future and rethinking their plans for the coming months and years. However, the vast majority of IT staff still believes in Cisco products and thinks that the company can offer something worthwhile. That’s good news for Cisco, and as long as it has the trust of IT, it will be just fine.
It’s Forgetting About Consumers
One of the biggest mistakes Cisco made over the last several years was pursuing the consumer market, for instance, the Flip video camcorder and Cisco’s ill-fated attempt to be a video-conferencing provider for consumer living rooms. Now, Cisco has stopped focusing on consumers, and in the process, the company can get back to doing what it does best: appealing to enterprise IT.
The Money-Spending Seems to Be Over
Cisco made a series of misguided acquisitions over the last several years, most notably its purchase of Flip. Now that Cisco is retracting a bit and trying to right the ship, its desire to spend has been diminished. That’s a good thing. Cisco doesn’t appear to know what it’s doing when it acquires companies. So, the best move it can make is to not do so. And so far, it looks like the company is heeding that advice.
Cisco Needs Better Pricing
Cisco is facing an inordinate amount of pressure from competitors, including HP, on pricing. The company’s routers and switches too expensive for corporate customers, and those customers are going elsewhere for their needs. By reducing expenses and cutting staff, Cisco should be able to get more competitive on pricing. If Cisco can deliver the right value for the right prices, it might just see its business start to grow again.
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