WSJ reports today that Cisco Systems (NASDAQ:CSCO) CEO John Chambers is working hard to streamline a company that he believes has become “too complex.” Recently the tech giant with a market cap of $86 billion shut down its two of its newest product lines, a flip video camera and an email product that were both floundering with customers. The company has also seen sales of its switching products, which account for 1/3 of revenues, dwindle in recent months. According to WSJ, “Rivals are chipping away at Cisco’s market share in switching. This stood at 68.5% last quarter, estimates Mr. Weckel, down from a recent peak of more than 74% in the same quarter a year ago. Add it up and revenue from switches could decline through next year, estimates William Blair analyst Jason Ader.”
While many investors currently view Cisco (NASDAQ:CSCO) stock as a cheap buy, WSJ warns that its balance sheets are deceptive. The company has a total of nearly $27 billion in net cash reserves, though 90% of that money is stored in overseas holdings, meaning it would be subject to a 35% corporate income tax should CSCO decide to bring the money stateside. The company is also losing its dominance in another product market, routers, as analysts say that Cisco’s market share has fallen from roughly 61% to 54% over the past. Router sales account for approximately 20% of revenues.
Chambers seems prepared to take drastic measures to revamp Cisco’s internal culture and financial health, as analysts rumor that the company may cut up to 10,000 jobs (15% of its workforce) by the end of the summer this year. The job cuts would be expected to save the company over $1 billion on balance sheets in its 2012 filings. CSCO stock is up .22%, trading at $15.63 with 52 week high-low range of $14.78 – 26.00.
Some of the company’s main competitors looking to capitalize on the networking leaders’ current dilemma will be: Hewlett-Packard (NYSE:HPQ), Alcatel-Lucent (NYSE:ALU), Juniper Networks, Inc. (NYSE:JNPR), and EMC (NYSE:EMC).