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