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Cisco Sets Stock Buyback

Light Reading
News Analysis
Light Reading
9/14/2001

Cisco Systems said today it would buy back up to $3 billion worth of its own shares over the next two years. The move is intended to show Cisco's confidence in its own prospects, as well as faith in the U.S. economy during a troubling time (see Cisco to Buy Back Stock).

"We have tremendous confidence in the financial systems of our country, in our industry and in our market-leading position both today and into the future," said John Chambers, president and CEO of Cisco Systems Inc. (Nasdaq: CSCO) in a statement released Friday.

The vote of confidence follows Cisco's $6 million donations to a variety of agencies, including the American Red Cross, following Tuesday's terrorist attacks on New York and Washington. Cisco was one of many companies that pledged financial support to the those affected by Tuesday's attacks (see Companies Take Action After Attacks).

If several more companies follow suit in announcing buy backs, it would add liquidity to the markets and help stabilize stock prices, therefore reducing the effects of a sell-off when trading resumes on Monday.

Indeed, American companies across several industries have had the same idea this week. H&R Block Inc. says its going to repurchase 15 million shares of its stock. The Shaw Group, which makes piping for power industry, says it will buy $100 million of its stock.

"I think this stabilizes Cisco's stock to some degree, indicates that the company thinks the stock is a good value," says Chet White, senior vice president of research at Wells Fargo Van Kasper. "It also suggests that Cisco has a strong balance sheet."

As Cisco itself is concerned, a vote of confidence from its board could not have come at a better time. In the past year, the company has taken lumps for its lackluster service provider business, which was stung by the failure of several startup carrier customers that Cisco helped finance. As two of its top service provider executives left the company, Cisco reorganized its engineering efforts into 11 technology groups (see Reorg Rips Through Cisco's Ranks).

As of September 13, 2001, Cisco has approximately 7.3 billion shares outstanding. Cisco shares closed at $14.47 on Monday, the last day that U.S. stock exchanges have been open this week. The stock's 52-week high of $63.88 was reached on September 11, 2000.

- Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.com

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Titanic Optics
Titanic Optics
12/4/2012 | 7:50:41 PM
re: Cisco Sets Stock Buyback
This means that they will use money (cash or new debt) that they have to prop up their stock price. We already knew they were slowing down on acquisitions, this is a stronger ratification of that notion.
Titanic Optics
Titanic Optics
12/4/2012 | 7:50:32 PM
re: Cisco Sets Stock Buyback
You're right. My statement really applies more to normal times. The SEC actually loosened or waived a few rules for share buybacks. So a lot of companies should take advantage of this to help stop the hemmoraging of their stock prices.

As to Cisco
>>people familiar with the company say they will be a lot more picky and will pay cash for companies until the stock comes back.<<
So, the share repurchase helps their stock come back. And they have to be pleasing the buy-side institutions--if the stock is sliding the buy-side would be irritated by them making a lot of acquisitions.

>>they are absolutely nowhere in optics. 3% of revenues last qtr.<<
Interesting thoughts. I think they should stick to access and metro, and not make Pirelli or Monterey type acquisitions. Access is probably a better niche than Metro for them. But, a lot of metro equipment companies are cheap these days.

>>ala and ericy are a joke with acquisitions (yes even worse than nt and lu). so, who else is there to compete against for the cherry deals?<<
Yes, true, in a business integration standpoint. But, Cisco has to show me what they can do in the long-haul, Bell-head world. The best they have done is with Cerent's box, while failing at Monterey. How has the Pirelli acquisition worked out?


noitall
noitall
12/4/2012 | 7:50:32 PM
re: Cisco Sets Stock Buyback
not necessarily...they have $18 B in cash and this stock buy back thing is a multi year plan. i'm told they will be acquisitive with more mature companies that can run as independent sub-sids. though that doesn't really gel with their new functional-looking organization model vs business unit. so hard to say how they'll integrate them but i'm told that's their model for the short term. people familiar with the company say they will be a lot more picky and will pay cash for companies until the stock comes back. most important fact to consider: they are absolutely nowhere in optics. 3% of revenues last qtr. they have to wait and see who's emerging as a leader in a segment and then pony up. good news for them is that nortel is as good as dead and so is lucent, at least for the short term. ala and ericy are a joke with acquisitions (yes even worse than nt and lu). so, who else is there to compete against for the cherry deals? cisco will disctate its own terms on the acquisition front. they will not stop buying companies especially now that they can pick them up on the cheap.
Light_Path
Light_Path
12/4/2012 | 7:50:31 PM
re: Cisco Sets Stock Buyback
At last count the Pirelli acquistion went from 5 customers to 25 customers in 1 year. Russo claimed 25 customers for the Pirelli 15800 when the Monterey was let go. Also, it is rumored that Cisco has something brewing in the Long Haul and Extended Long Haul (ELH) market. Pirelli did not know many things, but they knew how to work with light.
garyw_pa
garyw_pa
12/4/2012 | 7:50:12 PM
re: Cisco Sets Stock Buyback
Lets layoff thousands of employee's because business is poor, then announce a 3 billion dollar buyback of stock a couple months later.

This is a company with a big heart.
HarveyMudd
HarveyMudd
12/4/2012 | 7:48:59 PM
re: Cisco Sets Stock Buyback
The Cisco's unrealistic management reschuffle is causing stock prices to drop drastically. The Chamber's snake oil is not working. Cisco has free ride among the equipment buyers, but no more.

Cisco stocks are likely to drop very fast.
HarveyMudd
HarveyMudd
12/4/2012 | 7:48:58 PM
re: Cisco Sets Stock Buyback
The Cisco's unrealistic management reschuffle is causing stock prices to drop drastically. The Chamber's snake oil is not working. Cisco has free ride among the equipment buyers, but no more.

Cisco stocks are likely to drop very fast.
Light_Path
Light_Path
12/4/2012 | 7:48:57 PM
re: Cisco Sets Stock Buyback
Cisco has (had) $18.5 Billion in cash and cash equivalents to buy back stock. It has NO debt unlike many of its competitors (NT and LU to name a few) so it can buy stock. Cisco layoffs were 20% of its workforce. NT and LU chopped off more than 20%.

Cisco is at $12.60. NT 5.20, LU 5.80, JNPR 12.29, MONI 0.77, ONIS 4.88, CIEN 11.38, CORV 1.87 etc...

Add up all of Cisco's competitors market caps and they do not equal Cisco Market Cap. Actually, combined they equal 60% of Cisco's Market Cap.

Like it or not, while it has many challenges ahead of it, the 800 lb. gorilla known as Cisco is still very alive (and debt free).

LP
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