Was Cisco Wrong to Chase Consumers?

I think Pogue is giving Cisco too much credit. If the Flip had been an even bigger failure but Cisco's stock had kept up with the S&P, we wouldn't be having this conversation. 

Killing Flip, too, is as public and consumer-facing as buying Flip. You get the attention of consumers (i.e., individual investors). Kill Flip first. If the stock still doesn't move, they'll kill something much bigger.

Interesting point brought up in the NY Times (David Pogue) and CNet (former LR'er Maggie Reardon!) --

Maybe Cisco wants to hang on to key patents from Flip, for use elsewhere in the video strategy. Maybe that's the main part they were interested in all along, with the camera sales just being a publicity bonus that was nice but disposable.

http://pogue.blogs.nytimes.com/2011/04/14/the-tragic-death-of-the-flip/

http://news.cnet.com/8301-30686_3-20053337-266.html

No better than Sycamore? Ow.

Actually if you compare Sycamore stock performance to Cisco (or Microsoft) over the past 3,6, or 12 months, it's disturbing. (The 6-month chart is happier, at least for Microsoft, and of course CSCO/MSFT win over Sycamore if you use timeframes of 2 years or more.)

Good analysis indeed. Cisco is paying 1 to 2 percent dividend sometime this fiscal year -- that may have already started. But they need to do more. If you're a shareholder then Cisco is no better than Sycamore Networks. It's a place for your cash to rot or go away.

So, I was listening to the Podcast and heard a comment about how this was a penny a share change:

Cisco (according to Yahoo Finance) has 5.53B shares outstanding.  What I did not do any research on is any overhang from options.

So, a penny a share is a bottom line move $55.30M.  There EPS stands right now at $1.32 a share.  Market Cap is about $96B, Enterprise Value of $71B and a P/E 10ish.

So, let's say I want to get a P/E of 20ish.  They should target earnings of lets call it $1.58 a share or about a $.26 share price move.  In nice round numbers that's a profit move of about $1.4B.

LONG way to go gents.  Now, this is your standard value investor math with a PEG of about 1 and a bunch of rounding.  My question is what the heck are you going to do with the $26B on your balance sheet?  How about a share buyback or a dividend?

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