Bringing Cisco's Money Home
5:40 PM -- Analyst Zeus Kerravala of Yankee Group Research Inc. is proposing an interesting solution to the question of repatriating funds. He says it should happen, with stipulations that steer the money toward providing jobs, instead of things like stock buybacks.
He blogged about this Sunday for No Jitter, a cousin site to Light Reading, because of the Cisco Systems Inc. (Nasdaq: CSCO) question.
As you probably know, Cisco and lots of other companies have been stashing their cash overseas, hoping that the U.S. government will eventually declare a tax holiday on repatriating the funds. The hope comes from the fact that the government did exactly that in 2004 -- in fact, it looks like companies have intentionally left cash overseas in hopes of another tax break. (See Chambers Floats His Stimulus Plan.)
Cisco's case has a specific twist, Kerravala writes. Its growth has come more through acquisitions than through internal R&D for a long time -- arguably 18 years, dating back to the Crescendo Communications acquisition.
Blogger Brad Casemore backs up that idea, noting that Cisco's R&D pace has decelerated in the past few years.
You'll recall, too, that Kerravala suspects Cisco wants to make fewer acquisitions but make them bigger, something he mentions at the end of his blog entry. The company's new pledge to move faster might translate into striking quickly and thoroughly with a few large targets, rather than picking off a couple dozen squirrels like Versly.
In total: Cisco is probably itching to acquire, but it's not finding the right targets by looking beyond the United States. Repatriated money might give Cisco the leverage to do something really dramatic. "Personally, I'd love to see Cisco go back to its shopaholic ways," Kerravala writes.
Something like Kerravala's plan will probably end up happening, if only because the economy still needs boosting. But I have to be skeptical. Companies are great at finding loopholes. I'd expect them to find plenty of ways to skirt any restrictions -- those that don't get lobbied out of existence in the first place, that is -- to keep shareholders happy and avoid adding costs (jobs). Cisco might put the money to good use, but they would be an exception.
— Craig Matsumoto, West Coast Editor, Light Reading