Is John Chambers still good for Cisco?

It's been nearly five years since Chambers has been operating without a boss. How's he doing?

If you had bought 100 shares of Cisco the month John Chambers became CEO, it would have cost you $3,499.92 ($35/share) and be worth $31,156.80 today. But if you had waited until the day Chambers became both CEO and chairman ($24.34/share), you'd have spent $2,434 and it would be worth only $1,730.93 today, a 29% loss. Ouch.

This according to the stock calculator tool Cisco hosts on its site, which includes stock splits and adjustments and assumes reinvestment of dividends.

Cisco stock prices 1995

If you bought your 100 shares the day Chambers became CEO...  

Cisco Shares since 2006

If you bought your 100 shares the day Chambers became chairman ...  

In November, John Chambers will be celebrating his five-year anniversary of operating the company without a boss, as both CEO and chairman of the board. (January, 1995, Chambers becames CEO; November, 2006: Chambers became chairman and CEO.)

Prior to that, the populist view of Chambers was that he was a master of business execution. For many years, he was good for Cisco. But since he added the chairman role to his CEO title in 2006, Cisco has arguably not faired as well. Calls for his departure have recently gone from a whisper to a hum. A month ago, Forbes wrote a column entitled, Does Cisco Systems Have a John Chambers Problem? in which it pointed out, "Five years ago it netted 27 cents per dollar of revenue; now it gets just over a dime."

Then again, a petition started eight days ago entitled Fire John Chambers which hopes to gather 1 million signatures has accrued only a single one. So maybe calls for his exodus are somewhat less than a hum ... and more like a yawn.

To be fair, since Chambers first became CEO, revenue has grown astoundingly. Net income has grown, too, but at a much more meager pace. The first fiscal year completed after John Chambers was named CEO, Cisco had annual revenues of $1.2 billion with a profit (net income) of $410,456. In 2006, Cisco had revenues of $28.5 billion and profits (net income) of $5.8 billion. In 2010 it hit revenues of $40 billion and profits of $7.8 billion (net income).

Cisco revenue profit

In counter to the Forbes article and the valuation of 100 shares, Seeking Alpha's Gregory Lemelson thinks that revenue growth means investors have gotten a good deal in the past five years. He wrote a long-winded piece on how owner's equity has increased for Cisco shareholders over that time period. (He notes that he had recently invested his clients' money, but not his own, in Cisco two months ago). His argument is that the share price of $18.08 in 2006 would have gotten you a portion of about $24 billion in equity, versus the $17-ish price today gaining you a piece of a company valued at $45.5 billion -- with roughly the same number of outstanding shares circulating. And there's always at least once buyer for the shares, Cisco. Granted, shareholders can't really realize such equity unless the company is sold for parts, but it's certainly a fair way to figure out value.

I admit that I'm taking a small snapshot of the work Chambers has done in the past five years, leaving out an analysis of the most important part: new products developed. That said, share price, and Chambers role in it, means everything to Cisco. The company uses its stock to buy the technologies it needs. (See Cisco most acquisitive in 2010). If it misses analysts projections, Chambers is willing to layoff a bunch of his employees over it, too, as the Flip news this week shows.

Just for fun, let's say you bought 100 shares of Cisco at its IPO, ($23.01) on February 16, 1990 (about a year before Chambers joined the company). It would have cost you $2,301.12 and be worth $498,508.68 today. Then again if you were smart enough to have sold it in March, 2000, during the height of the bubble, you'd have netted $2.2 million and change ($77.81/share).

Do you have confidence that Chambers is leading Cisco in a good direction for all involved: investors, employees, partners and customers?

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