SAN JOSE, CA – On Friday, a group of Chinese and American citizens filed suit against Cisco Systems (NASDAQ:CSCO) alleging that the company conspired with the Chinese Government to monitor and torture members of the outlawed religious group, Falun Gong.
According to the complaint, Cisco helped to create a surveillance and internal security network known as ‘Golden Shield‘ that helped the Chinese Government to identify, track, capture, and isolate members for Falun Gong. The complaint directly ties the actions of engineers and executives at the company’s San Jose headquarters with the design of the network.
However, the company claimed that the case was without merit as a previous decision by the U.S. Supreme Court barred the bringing lawsuits against U.S. companies for selling ‘generic equipment’ to foreign governments that was later repurposed. In response to the complaint, Cisco stated the ‘legal sale of generic network routers does not support a claim for aiding and abetting police brutality or international law violations.’
The lawsuit follows a series of setbacks for the company as reports surfaced that the company is in the midst of another round of internal restructuring. According to a report from Credit Suisse, shares in the company could fall by close to 15 percent in the coming months as the bank issued an Underperform rating with a price target of $ 21 per share.
Credit Suisse Managing Director, Kulbinder Garcha stated that software-defined networking is going to disrupt traditional networking giants. This includes Cisco which has traded between $ 16.68 and $ 26.49 over the previous 52-weeks. Other companies that could be affected by Credit Suisse’s analysis include Juniper Networks, Inc. (NYSE:JNPR), and Ubiquiti Networks Inc. (NASDAQ:UBNT)
Regarding Ubiquiti, Garcha stated that ‘we believe that Ubiquiti has created a relatively unique business model that can disrupt several markets in the networking space over time. However, we believe shares are fully valued, with strong near-term revenue momentum offset by medium-term competitive risks and possible margin pressure.’ Credit Suisse issued a price target of $ 33 for the company.