Time to go, Mr Chambers

I am no Nostradamus, but my unbiased predictions do crystallise occasionally. So it is with what I have been saying on Cisco — not just after I quit the company in July last year but even when I was with the company and within its own blogging portal for staff.

On November 12 last year (https://joslinv.wordpress.com/2010/11/12/will-cisco-become-a-penny-stock-soon/), I wrote within these columns that very soon the stock price of rival Juniper will be more than double that of Cisco.

That turned true today after Cisco turned in weaker than expected results yesterday and, as usual, John Chambers opened his mouth. At the time of writing, Cisco is going for $19.23 (down 13% for the day), while Juniper is at $41.05. This is much more than double the price of Cisco.

Old-Generation Company: What was once a visionary company is now an old-generation company with no clue about who they are acquiring and why and, importantly, why they are unable to innovate and compete with even Chinese vendors such as Huawei.

I have respect for John Chambers for he led the company to glory. Importantly, when I sent him a mail on why I quit Cisco, a day before my last day, it elicited an immediate reply, instructing a direct report to probe the issues I had raised. It was a little too late for me as I had already accepted an offer at BT. Mr Chambers, however, instantly walked a notch up the pedestal in my esteem.

But that is not going to stop me from saying that it is time for him to step down without delay rather than preside over Cisco’s demise. His credibility is clearly at stake for Cisco is the worst performing company on Wall Street during the last one year.

I am no longer with Cisco, but I still own Cisco stock. Cisco is a company that buys back stock. So, its deliberate ploy is to ensure its stock price does not go up. These are not things a company or individuals with business integrity will do. No stock price appreciation, no dividends. So, why will investors want to invest in Cisco?

Not just Juniper, another small competitor, Riverbed, also has a stock price that is more than double that of Cisco.  A few years ago, a senior Cisco colleague left the company to join Riverbed when the latter’s stock price was much less than that of Cisco. Another young colleague joined Juniper when its share price was about $25 less than what it is now.

Talent Flight: Cisco has sunk deep — losing key talent, getting stuck with dispensable people, falling short in innovation, losing market share to all and sundry in the networking business and adopting questionable tactics to buy back stock.

What more shame is Chambers waiting for to throw in the towel? I cannot even say, “go in dignity, Mr Chambers”, because there is  none left already.

— G Joslin Vethakumar

Advertisements

5 Comments

Filed under Cisco, John Chambers

5 responses to “Time to go, Mr Chambers

  1. Tory

    Joslin,
    I am sure you have other reasons behind your view on Cisco. I just want to point out that much of your concern is valid but also some of your reasoning is faulty. I don’t work for Cisco and I do not represent them in any way. That being said your concern about thier stock price is way off base. Let me put things in perspective.
    http://finance.yahoo.com/q/ks?s=CSCO+Key+Statistics
    If you look under Share Statistics on the page above and look at shares outstanding. You will find as of today Cisco has 5.53 billion shares outstanding. And unfortunately thier stock price is $16.67 as of this minute.
    So compared to Juniper lets see:
    http://finance.yahoo.com/q/ks?s=JNPR+Key+Statistics
    Juniper has 533.07 Million shares outstanding but their Price per share is currently $39.29.

    So lets do some calculations
    5,530,000,000 x 16.67= 92,185,100,000
    533,070,000 x 39.29= 20,944,320,300

    So to make math easier if Cisco had the exact same number of shares that Juniper did (for math’s sake lets say just 1 billion).
    Cisco’s price per share would be $92.18 and Juniper’s would be $20.9 I wont post the link but Riverbed would be $5.66, so moral of the story is, don’t look at the Price per share without looking at how many shares are out there for a particular company.

  2. I appreciate your inputs but while the number of outstanding shares does have a bearing on the stock price, ultimately what determines it is the performance of the company itself. There are many companies that have as many outstanding shares or higher whose stock prices are way higher than that of Cisco.
    Some examples will include Oracle (whose stock was priced much less than that of Cisco a year or so ago), Microsoft and Intel. Key factors that help push prices up are sales figures, price/sale ratios, leadership guidance, fundamentals/technicals and market share.
    I have great respect for Cisco’s past and John Chambers. But its present is grim and the future uncertain – some factors I weighed when quitting the company. I have no axe to grind with my comments.
    It is also worth noting that in the three months since my blog post, Cisco stock has fallen by another three dollars (a 20% decline).

  3. Pingback: John Chambers, A Celebrity CEO | Top of the Word

  4. Pingback: Goodbye Networking and Box Pushing for Chambers! | Top of the Word

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s