How well is Cisco management running the business?

BusinessWeek published an interesting story this week questioning the future of Exxon, currently the most profitable company on earth. Could Cisco perhaps be the "Exxon" of networking vendors? How well is Cisco management running the business? Yours truly decided to "tackle" the latter question by examining the historical operating margins of Cisco and then correlating them in the same time frame with Cisco's historical stock prices. Wikipedia states:

Operating Income = Operating Revenue – Operating Expenses

According to Motley Fool:

Operating Margin Operating margin equals operating income divided by sales. This is one way to show how well management is running the business.

View the past 16 years of Cisco operating income divided by net sales (i.e. operating margin percentage) for Cisco January Quarters:

Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994
19.5 24.5 25.2 26.1 30.0 28.7 26.8 15.6 15.3 24.3 16.4 32.7 30.7 36.3 17.2 39.7

Source: U.S. Securities and Exchange Commission View the past 16 years of Cisco common stock prices (closing price adjusted for dividends and splits ONLY for the day the quarter ended) for Cisco January Quarters:

Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994
15.89 24.20 26.35 18.78 17.90 27.33 13.86 19.13 38.38 51.94 25.70 9.61 7.62 4.51 1.88 1.96

Source: Yahoo! Finance View the past 15 years of Cisco operating income divided by net sales (i.e. operating margin percentage) for the following Cisco Quarters:

Month Qtr Ended Year 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994
Jan. 24.5 25.2 26.1 30.0 28.7 26.8 15.6 15.3 24.3 16.4 32.7 30.7 36.3 17.2 39.7
Apr. 21.9 24.8 22.6 29.4 27.7 27.0 18.1 (-80.4) 15.1 27.0 12.5 32.7 35.8 37.4 39.7
Jul. 24.4 24.4 25.0 30.3 30.4 25.6 19.6 (-03.2) 14.4 24.0 29.1 16.2 32.8 35.8 38.4
Oct. 24.0 24.8 24.3 24.8 30.0 27.2 24.1 07.8 13.8 16.7 28.1 25.5 21.8 36.4* 38.6

Source: U.S. Securities and Exchange Commission *Oct. 95 - 36.4% operating margin: U.S. SEC View the past 15 years of Cisco common stock prices (closing price adjusted for dividends and splits ONLY for the day the quarter ended) for the following Cisco Quarters:

Month Qtr Ended Year 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994
Jan. 24.20 26.35 18.78 17.90 27.33 13.86 19.13 38.38 51.94 25.70 9.61 7.62 4.51 1.88 1.96
Apr. 25.60 27.03 20.95 17.27 20.91 14.34 13.91 15.60 69.33 28.51 11.99 5.15 5.82 2.22 1.68
Jul. 22.43 28.97 18.08 19.15 20.92 19.08 11.82 19.06 62.81 31.07 16.29 8.85 5.71 3.11 1.17
Oct. 16.31 31.90 23.72 17.14 19.21 19.80 11.78 17.29 50.69 37.00 14.67 8.92 6.58 4.24 1.67

Source: Yahoo! Finance


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