RBC Capital affirms Cisco (Nasdaq: CSCO) at Outperform with a pirce target of $35 following reports of a headcount adjustment at the company.

Analyst Mitch Steves commented, According to Reuters and CRN News, Cisco is planning a reduction in force (RIF) of approximately 14,000 employees or ~20% of total headcount. Given that the Company has been acquisitive over the past six months and Cisco is shifting its focus to software/security/services we think a RIF would be beneficial to long-term operating margins. While a 20% reduction (~14,000 employees) would be severe, we think a number closer to ~10,000 would be fair or in the range of 10-15% (73,104 employees as of latest 10-Q). Finally, we think a RIF would act as yet another signal that the Company is focused on changing its current business model. Net Net: we think a reduction in force would be beneficial given the number of acquisitions the Company has made and believe the topic will now be addressed during [today's] conference call.

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Shares of Cisco closed at $31.12 yesterday.