Cisco CEO John Chambers was recently named one of America's Best Leaders, today however, The New York Times in a scathing article (at least in my opinion), is questioning whether Cisco shareholders will ever see a return on their investment.
According to the Times story:
Breakingviews.com correspondent - Robert Cyran criticized the eternal ebullience of Chambers:
"Mr. Chambers, who once claimed Cisco could increase sales by 50 percent a year over the long run. They’ve since grown 7 percent annually."
Cyran then lashed out at Chambers' management reorganization:
"Cisco has 59 standing boards and councils. This seems like a recipe for endless meetings, management confusion and reduced accountability."
He also cast doubt on Cisco's acquisition strategy:
"If Cisco follows the acquisition machine model, the difficulty in running the company smoothly while mounting ever-larger deals will become increasingly evident."
Cisco's stock repurchases were questioned:
"The other pillar of Cisco’s strategy, stock repurchases, hasn’t rewarded shareholders either. Returning excess cash from operations to shareholders should increase a stock price. Unfortunately, in Cisco’s case, the practice hasn’t measured up to theory. Cisco has spent close to $60 billion on stock buybacks since the start of its 2002 fiscal year. That’s about three-quarters of cash flow from operations. So why haven’t shareholders benefited?"
Finally, Cyran blasted the options compensation of Chambers and his cohorts:
"Part of the blame, however, lies in Cisco’s generous use of options as compensation. Mr. Chambers was one of the loudest voices in Silicon Valley against forcing companies to show the cost of these grants. When Cisco spends cash to mop up the resulting shares, management gets the benefit over shareholders."
However, I believe the very first paragraph of The Times article was the real stunner:
"Cisco, the computer networking giant, has spent the last decade acquiring rivals and buying back stock. It’s time to acknowledge that this strategy isn’t working. Investors who bought Cisco’s shares a decade ago have received no return on their investment."
What's your take, is John Chambers - America's best leader an investor's nightmare?
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Cisco isn't what it used to be.....
I don't really care about John Chambers one way or the other, but my dissatisfaction with Cisco is growing. The move into toys (Linksys and Flip Video) makes little sense, and the "me too" move into selling servers (and desparately trying for some form of differentiation) doesn't look good so far.
I would agree with factional fighting and management malaise, from the customer view it's getting difficult to understand what Cisco stands for, and what they focus on. And there is no consistent message to reassure me that the company knows where it is going.
I'm keeping a closer eye on Cisco's competitors these days. I might need to be ready.
http://etherealmind.com
Really?
The author states: "Investors who bought Cisco’s shares a decade ago have received no return on their investment"
Ten years ago was the height of the telecom boom. Is it really reasonable to expect Cisco to exceed levels when it had a crazy valuation of around $500B? I would say though it's time for Cisco to start paying a dividend.
Using Cisco cash for dividends
Using Cisco cash for stock dividends?
That means all Cisco shareholders would benefit.
And that's simply crazy!
Why?
Because Chambers and his cohorts are using Cisco cash for their options compensation:
Dividends won't make Chambers & Company rich!
Sincerely,
Brad Reese on Cisco
Network World Cisco Subnet
BradReese.Com Cisco Refurbished
Enabling Affordable Networks
Cisco has not been a solid invenstment for some time
I really like Cisco technology, but I don't find Cisco a solid financial investment at this time. I owned Cisco through the 90's the first part of this decade, but I ended up selling the stock in 2005, it simply doesn't perform as well as other stocks. But, keep in mind other high tech stocks are in much the same situation; one only has to look at Microsoft or Intel to see similar performance. The difference between Intel and Cisco, is that Intel pays a dividend. This dividend, while not great, helps to offset the lackluster stock performance.
Cisco's huge stock liquidity
Hi Bbaltas,
It's my opinion that Cisco's huge stock liquidity is used by Wall Street to execute trading programs tied to black box investing!
Sincerely,
Brad Reese on Cisco
Network World Cisco Subnet
BradReese.Com Cisco Refurbished
Enabling Affordable Networks
Will say more later.
Thanks for posting this, Brad. This is a brilliant piece.
Furthermore, Robert Cryan is a well respected journalists. He's got Cisco "failed acquisition" strategy by the balls in this piece. The fact that share holders didn't get any dividends in a 10+ year time span is just downright appalling.
I'm in and out of meetings/conference calls all day today, but I'll have more to say about this later in the day.
I'm also hoping my nemesis Cisco Cheerleader will also chime in with his sage commentary, retort to whatever I have to say, of course. :-)
Best,
failed strategy does pay off
... for Cisco execs and insiders at acquired companies.
'Zactly
You, kind sir, have it right.
Hats off to you!
I couldn't agree more.
Best,
this article is not from New York Times
fyi - this is from www.breakingviews.com, an analysis and commentary site...it is syndicated online by nytimes.com...
I thought I had made it clear
Hi BV Guy,
I thought I had made it clear who was the author and originator of the story:
My apology if I did not, however, The New York Times by publishing this story (in my opinion at least), gave it extra - ZING!
And it's also my opinion that John Chambers just absolutely loves dynamism, pizzazz, oomph and zing!
Sincerely,
Brad Reese on Cisco
Network World Cisco Subnet
BradReese.Com Cisco Refurbished
Enabling Affordable Networks
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