tag:blogger.com,1999:blog-24695385.post2709819272392922356..comments2023-09-15T07:56:04.399-04:00Comments on The Strategic Investor: Why CSCO is so cheap: John Chambers RiskStrategic Investorhttp://www.blogger.com/profile/06847403858456772158noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-24695385.post-33079140882042032742011-07-06T16:35:22.123-04:002011-07-06T16:35:22.123-04:00All of his outperformance came from that period, n...All of his outperformance came from that period, now, whether he saw that as a bubble, or was always wildly optimistic - and had his optimism confirmed by a bubble - is hard for me to say.<br /><br />This much I can say for him, he was less willing than Lucent to extend sales to dotbomb firms on credit.<br /><br />Still, his thinking has never really seemd to recover from seeing the late 1990s as an anomaly rather than the rule.Strategic Investorhttps://www.blogger.com/profile/06847403858456772158noreply@blogger.comtag:blogger.com,1999:blog-24695385.post-67126979497244815102011-07-01T08:39:57.568-04:002011-07-01T08:39:57.568-04:00Most of his outperformance as an executive came in...Most of his outperformance as an executive came in his first few years when he corretly pushed the company to invest aggressively in networking at a moment when the dotcom bubble and its related telecom infrastructure bubble was not have been anticipated. He saw clearly.Bank of America Onlinehttp://www.internetbankings.org/usa/bank-of-america-online-banking/noreply@blogger.comtag:blogger.com,1999:blog-24695385.post-30384410921095022952011-05-21T22:27:19.608-04:002011-05-21T22:27:19.608-04:00Thanks for the question, Thomas, for I believe tha...Thanks for the question, Thomas, for I believe that is exactly the question.<br /><br />For me, there are three criteria, one independent of the other two. The short answer is: I would need to see the board adopt more shareholder friendly policies with regards to equity compensation, Chambers should be replaced and/or the stock would have to trade at a discount to book (currently $9 per share).<br /><br />In depth, my reasoning is as follows:<br /><br />First, I need to see management and the directors make a clear statement that shareholders equity belongs to shareholders, not to employees. Yes, it is true that at some level, share-based payment is necessary to attract talent, but this should be used sparingly. Management needs to demonstrate that they get this, and clearly adapt a policy of awarding no more than a sliver (say 1% of shares outstanding) on an anuual basis. This would mean no more than 55 million shares, combining all forms of payment - options, restricted stock or stock appreciation rights.<br /><br />Second, Chambers has to go. Most of his outperformance as an executive came in his first few years when he corretly pushed the company to invest aggressively in networking at a moment when the dotcom bubble and its related telecom infrastructure bubble was not have been anticipated. He saw clearly, I think that the market was going to valuing those assets at a multiple of their cost - that is, when a customer bought Cisco products, the market priced those at a premium to their actual or replacement cost (this is why telecom companies could easily obtain financing for "optical networks" and all that other crap that they deployed in 1998-99, and which only now is starting to have end-user demand). Chambers, in short, understood as few did that if Cisco built it, customers would come. This gave the company a big advantage, until the game changed. Chambers has always believed that he can grow the company aggressively, and has made some very poor judgment calls in an effort to sustain revenue growth that simply wasn't there. Sometimes, you have to be happy with high single digit growth. He isn't so he wastes cash. 10 years on, he still hasn't gotten it, and an exec who cannot learn from his mistakes has to go. Period.<br /><br />Finally, even if the other two criteria were not fulfilled, were the stock to fall to or below book value, an unlikely event without a major market pullback, I would see it is as an in-the-money option on either or both of the first two conditions occurring, and would buy.<br /><br />I must say that these are very hard conditions, but there are simply too many other good things to do with my money than to buy and pray for CSCO to get itself straightened out.Strategic Investorhttps://www.blogger.com/profile/06847403858456772158noreply@blogger.comtag:blogger.com,1999:blog-24695385.post-16577312679842044522011-05-20T16:51:23.623-04:002011-05-20T16:51:23.623-04:00When is the time, if there is going to be one, to ...When is the time, if there is going to be one, to buy this stock.thomashttps://www.blogger.com/profile/03953413782402284549noreply@blogger.com