Cisco Looking at Maffei?

Amid a hailstorm of rumors about its executives, Cisco Systems Inc. (Nasdaq: CSCO) will report earnings to an anxious market late Tuesday afternoon. Wall Street is expecting steady earnings growth from Cisco, despite its faltering competitors. However, the rumors and general market malaise has sent Cisco shares close to a 52-week low of $11.04 (see Cisco Stock Falls on CFO Rumors).

Cisco shares were down $0.51 (4%) to $11.37 in late afternoon trading on Monday as the Dow Jones Industrial Average careened toward a triple-digit drop in response to drab economic news.

The latest Cisco scuttlebutt has a familiar face in the financial community in talks to become the networking giant's next chief financial officer. Greg Maffei, CEO of the bankrupt 360networks Inc., is one of three finalists Cisco has considered to eventually replace its current CFO, Larry Carter, a source close to Cisco said Monday. Carter, 59, was soon to discuss a several-month transition that would allow him to retire, says the source, a former Cisco manager.

Maffei, who has been with 360networks since January 2000, was previously CFO of Microsoft Corp. (Nasdaq: MSFT). Prior to Microsoft, Maffei was a VP at Citicorp Venture Capital.

Officials at Cisco and 360networks won't comment on the rumor. Light Reading was unable to independently confirm that Maffei had been considered for a Cisco job.

Other industry sources speculate that Dennis Powell, Cisco's corporate VP of finance, seems more likely to take Carter's post when the job opens up. Perhaps Maffei is being looked at for a different Cisco management post, they say.

Interestingly, several executive departures have been ground through the rumor mill since Cisco's senior VP of worldwide service provider operations, Bill Nuti, left to become president and chief operating officer at Symbol Technologies Inc. last month. Atop all that are the rumors that Cisco is making cuts and reorganizing its resources in its service provider business. In each case, however, the rumors haven't been confirmed by sources with firsthand knowledge.

Cisco's most recent reorganization, in May, left the company with eight technology groups -- Switching, Voice, and Storage; Ethernet Access; Access and Routing; Carrier Systems; Optical Networking; Network Management; Internet Technologies; and Service Provider CTO, led by Mario Mazzola, Cisco's chief development officer. About a year ago, Cisco's reorganization yielded 11 technology groups, giving wireless technologies and routing software their own units (see Reorg Rips Through Cisco's Ranks).

Apart from any comments related to the myriad of rumors, investors are looking for Cisco to report pro forma earnings of 12 cents a share on revenues of $4.9 billion for the quarter ended July 31, according to a survey by Multex.com.

Cisco remains one of the strongest networking and telecom equipment makers with $21 billion in cash and investments at the end of the last quarter. However, Cisco investors have seen the company lose more $195 billion in market value since November 1999 -- one of the largest drops in market capitalization of any U.S. company in history.

The question is whether some stabilization of the enterprise networking business can help assuage the miserable telecom environment.

"We expect continued declines in sales to carriers given the depressed [market] conditions," wrote Raj Shrikanth, an analyst at Deutsche Banc Alex Brown LLC in a note to clients on Monday. "However, we expect the enterprise business to be up sequentially in the U.S."

Some note that even if Cisco's service provider business had stopped its decline, it wouldn't necessarily mean great things for Cisco's bottom line. "Even if Cisco were to achieve its goal of increasing service providers sales to account for 40 percent to 50 percent of [its] total [sales], it would be sacrificing margins and earnings growth for the slower rate of ongoing service provider capital spending we are forecasting through the balance of this decade," writes Crédit Lyonnais Securities Inc. analyst Gabriel Lowy, in a note to clients. (Lowy rated the stock a Hold, with a price target of $10.40 on Monday.)

But the biggest thing that investors will be keeping an eye out for is some sense of the future. Any guidance, or hint as to the current business environment, will be closely watched.

During its last earnings call, the company wouldn't go so far as to say that the markets in which it competes had reached their bottom. It did, however, forecast that revenue growth for the quarter would be "flat to up slightly, meaning very low single-digit growth."

— Phil Harvey, Senior Editor, Light Reading
BuckStopsHere 12/4/2012 | 10:00:19 PM
re: Cisco Looking at Maffei? Is it possible that 360 went bankrupt because Maffei followed the rules rather than logging opex as capex, etc? And, if so, did he do the right thing?
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