Cisco Said to Spend Up to $4B to Lift Mexico Production

(Bloomberg) -- Cisco Systems Inc. plans to spend as much as $4 billion in Mexico over the next couple of years, upgrading its factories and increasing production through contract manufacturers, a person with knowledge of the matter said.

The biggest maker of equipment that runs the internet, based in San Jose, California, will announce the plans Tuesday, said the person, who asked not to be identified because the news isn’t public yet. The spending figure, which may not be publicly disclosed with the announcement, includes contracts with manufacturers, as opposed to money spent directly on factories, and includes spending that had already been planned.

A Cisco spokesman declined to comment. Routing is Cisco’s second-largest revenue source.

The plan is a boost to Mexican President Enrique Pena Nieto as he seeks to show his economic reforms are attracting more investment. The timing could be delicate for Cisco -- six weeks after the company announced job cuts and a day after the U.S. presidential debate, in which Republican candidate Donald Trump decried the flow of jobs to Mexico and other countries, threatening to increase taxes on companies that move investment outside the U.S.

It would also be one of the first major investment announcements by a U.S. company in Mexico since April, when Ford Motor Co. said it would spend $1.6 billion on a new small-car factory in Mexico, drawing a rebuke from Trump. In June of last year AT&T Inc. said it would invest about $3 billion to extend mobile Internet service to Mexico in addition to spending $4.4 billion earlier in the year to acquire Iusacell and Nextel Mexico.

Cisco said in August it plans to cut about 7 percent of its workforce. Savings from the job reductions will be invested in newer businesses that Cisco expects to fuel sales growth, such as cloud computing and connected services, the company said.