Cost saving necessity drives Cisco to shut down

Most of American and Canadian offices of the networking giant Cisco Systems will be shut down from Dec. 29 to Jan. 2 in a move the company says will save it about US$1 billion. This announcement is no surprise today for tech companies and it is surely a response to the gasping economy when companies are making efforts to cut costs as demand for new computing equipment slows down.

Matt Robison, an equity analyst with Pacific Growth Equities, confirms that the company is doing this to cut costs. He notes that tech companies need some time to get things cleaned up and ready for the New Year. Yet, the general reason is surely the poor economy. Robison adds that the vacuum in demand is inevitable and companies will spend money at the end of this year in anticipation of lower budgets next year.

Meantime, irrespective of the global crisis Cisco remains viable and which is more it is very healthy among technology stocks and massively profitable. Cisco reported nearly $2.5 billion in earnings on $10.3 billion in revenue during the quarter ended Oct. 25. The company also reported nearly $5.2 billion in cash and cash equivalents during the same period. However, the company’s growth slowed down in recent years and it is likely to search new ways for expansion. Robison notes that Cisco is expected to become a server supplier. The move seems to be aimed at integrating switch and server functions to address middle market interests and further minimize the amount of resources needed to run large computer networks.

Being the indisputable leader in the switches and routers market, Cisco faces competition from a variety of smaller companies and blue chip computing concerns like Juniper Networks, F5 Networks, Brocade, Foundry Networks, the ProCurve unit within HP, Alcatel, Lucent, Ericsson, and Huawei, a large private company in Shenzen, China.