Cisco allocating $2.5 billion to let customers defer payments to 2021

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Chuck Robbins, CEO of Cisco, speaking at the 2019 WEF in Davos, Switzerland on Jan. 23rd, 2019.

Adam Galica | CNBC

Cisco announced a financing program on Tuesday that will let customers defer 95% of their payments for new products until 2021. Cisco is committing $2.5 billion to cover financing for the effort.

The move represents a corporate response from one of the largest enterprise technology companies to the business fallout from Covid-19 while unemployment claims quickly pile up. The offerings could help customers preserve cash amid reduced economic activity while people stay at home to avoid further spread of the coronavirus. Then, once conditions have improved, they’ll be in a better position to pay what they owe.

Cisco customers won’t have to pay for software, hardware or services they buy for 90 days, so long as orders are placed between Tuesday and July 25. After the 90-day period, they pay 1% in the total contract value per month until the end of 2020, according to the company’s website. They’ll have to make monthly payments in line with the terms of their agreements after that. Pre-owned Cisco products are also available for payment deferrals through 2021.

Customers had shown they wanted to know how Cisco could help them obtain technology — to handle remote work or service their own customers — while being uncertain about the future of the economy, Kristine Snow, president of Cisco Capital, told CNBC in an interview on Tuesday.

“They know when and exactly how much they’re going to make the payments, yet they can acquire the technology now,” she said. 

The cost of up to 5% of services from Cisco’s partners, like installation, can be included in the total bundle, Snow said, noting that the offer applies for all Cisco products.

The announcement from Cisco, a component of the Dow Jones Industrial Average, comes six days after Hewlett Packard Enterprise, which competes with Cisco in the ethernet switch market, made a similar announcement with a commitment exceeding $2 billion.

Few other enterprise tech companies have introduced these sorts of programs, although some have made promises to protect their employees. In March Salesforce CEO Marc Benioff said his company wouldn’t make significant layoffs in the next three months. Microsoft-owned LinkedIn told TechCrunch last week it had no plans for layoffs at least through the end of June.

Cisco shares were up more than 3% in late-day trading on Tuesday, a strong positive day for tech stocks overall.

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