Letter to Cisco CEO John Chambers regarding his “predictable gloom” in assessing the company’s future to stockholders
Dear Mr. Chambers:
You have once again skewered shareholder value this week with your predictable gloom, that historically belies the contrary reality in Cisco’s steady increase in sales and profits and in so doing raised questions about your leadership.
Why do you, for example, feel so compelled to follow quarter after quarter of greater sales and profits and predict decline far beyond what the SEC expects in its vague standards for forward looking statements? Are you a forecaster?
As I noted in a previous letter, a gentleman has been putting his children through college simply by selling Cisco short just before your quarterly earnings reports. He has rarely been disappointed during the past decade. Recall, Cisco stock reached over $80 in March 2000 and closed at $16.50 this past Friday, with no stock splits, billions of dollars in futile stock buybacks, and a much larger company in sales, profits and other indicators. Even with a slide in revenue guidance predictions, Cisco stock has sunk far too low, reflecting a loss of confidence by the investment community.
As a shareholder, who over the years has observed your bizarre practices during quarterly report seasons and has heard the opinions of other shareholders, it is clear you are without peer for un-necessarily spooking your loyal owners. It is one thing for hope to spring eternal; it is quite another for you to repeatedly dash hope. The Chambers curse on Cisco shareholder value is like the curse of the Bambino on the Boston Red Sox until 2004.
You and the Board of Directors are sitting on just under $50 billion in liquid assets. Your recent establishment of an 8 cent per share dividend per quarter does not compare with what you can and should do. That is, you should announce a special $1 dividend and raise your quarterly dividend to 15 cents per share per quarter. That is what you must do if you have any sensitivity toward increasing shareholder value. What must shareholders do to make you, their employee, take that course of action?
Staff analyst Rolfe Winkler of the Wall Street Journal on May 11, 2012 wrote:
“Cisco’s stock has been dead money since 2001. Unable to increase revenue much faster than what is likely to remain a sluggish economy, it is likely to stay that way.”
Except that Cisco’s stock has been dwindling dead money—big time—since the year 2000.
Someday, scholars may find a way to explain your leadership in driving the value of your company’s stock down. For now, suffice it to say that your course of action, other than retiring before your contract is up, is to increase dividends and issue a special dividend. Cisco certainly has the cash hoard to do this, especially if you cease a clever strategy that shifts costs in ways that park more Cisco profits abroad.
I am asking Cisco shareholders to contact us at [email protected] with their views and complaints, along with their predictions as to what they think would happen to Cisco shares should Mr. Chambers announce an early retirement! Will they go up, down or pretty much remain unchanged?