Last post is spot on. Care to look at the uk director of enterprise networking as well.
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I have the unique perspective of having worked for both companies. 14 years at Kodak and I saw some of the worst mgmt behaviors. The typical good old boys club , mentors protecting their prodigy list, ladder climbers smooching behind right out in the open, not bubbling up bad results, changing info to make it look better, and so on.
Over my last 5 years of 16 at Cisco I saw the same behaviors and made mention of the comparison to many people (managers included). Many agreed but were powerless to do anything, and just kept their heads down to avoid losing them.
Watch the carnage, it is coming.
@L4faJdi-bate - Great article and quite sobering. Unfortunately I think it is all too true. The focus is on grabbing what ya can, as fast as you can and getting the hell out before it crumbles down around you. Better yet...do all that AND weave in a poison pill and/or golden parachute to your employment agreement. Thay way if and when it does all go bad and ya don't get rich on downsizing and stock grabs, they have to pay to get rid of you.
Look at the recent scandal @ Wells Fargo and how their leadership went out the the door as an example. Enron...remember them? Ironically, Donald Trump is hiring all these morally d-Bags as fast as he can.
Morale of that story......It's good to be the king.
It's beyond saving. Here's a long but important analysis of the disastrous effects of short-term financial engineering vs. long-term value creation. No need to try to relate it to current conditions at Cisco. Everyone here will recognize that Cisco is a poster child for the kind of short-termism the author argues against, and Chuck is quoted and held up as an example of CEO irresponsibility.
http://www.forbes.com/sites/stevedenning/2017/01/08/resisting-the-lure-of-short-termism-how-to-achieve-long-term-growth/#539d3bcd3ab9
"Thus the current situation is one of fundamental institutional failure across the whole of society. The behavioral breakdown is mutually reinforcing. CEOs are extracting value from their firms, rather than creating it. CFOs are systematically enforcing earnings-per-share thinking in decisions throughout their organizations. Business schools are teaching their students how to do it. Hedge funds and activist shareholders are gambling risk-free with other people’s money to take advantage of it. Institutional shareholders are complicit in what the CEOs and CFOs are doing. Regulators remain indifferent to systemic failure. Rating agencies reward malfeasance. Financial analysts applaud short-term gains and ignore obvious long-term rot. Politicians stand by and watch. In a great betrayal, the very leaders who should be fixing the system are complicit in its continuance. Unless our society as a whole reverses course, it is heading for a cataclysm."
While one can always argue the smaller things the broader trend is below. In the g7 the usa has a outsize weight and a still youngish population. Chindia is moving to its historical figure of 30-40% of world gdp which is estimated a few 100 years ago. These 3 are the only viable large economies of this century with enough population, weapons and growth to ride things out. Rest esp western europe and japan is seeng steep declines in hard power and growth and aeging pop which creates tensions as refugees and immigrants from africa and middle east hardly measure up to even the lowly h1b stereotype popular on here...
The Int'l Spectator @spectatorindex
In 1991, the G7 countries made up 50.4% of world GDP.
In 2020, they are projected to make up 29%.
Apple miss sales target, CEO Tim Cook takes paycut. Cisco miss sales target (or not), people gets layed-off. Enough said.
Cisco isn't anywhere near failure, but the company is now in a downward trend that will require exceptional decisions from the ELT, which I think is clear they lack the experience and ability to make them. Chuck is a sales guy with no senior experience outside Cisco, learning how to be a CEO on the job. Chris is a ex-SE, ex-Sales guy who's had no senior experience outside Cisco. Rowan is a fake who wishes he worked for Facebook or Google. And we haven't been able to keep anyone senior in engineering since Chuck took over.
Aside from the competition in switching and routing, some of Cisco's other products will start to decline in volume and rev over the next few years due to market shifts. For example, no company will be buying handsets in 3 years. Customers are moving away from blade servers where UCS has its biggest USP. Over the next 3-5 years there will be a huge shift to SaaS and public cloud by enterprises, unlike anything we've seen to date and will destroy Cisco's Nexus cash cow! Why do you think Amazon are currently building the biggest DC's ever built, all around the world right now? There are hundreds of others I could name, but what I don't see is how Cisco will backfill these revenue streams. Security is growing, but not anywhere fast enough. Services is a joke as AS are the hardest part of the business to work with and customers see this. So where will it come?
I hope there is a tax holiday and the ELT use it to artificially inflate the share price and not to secure the future of the company, as I have alot of shares and it would be a nice end to an era for me!
BTW you nailed it on the head without realising it , when was the last piece of kit Cisco released that was a game changer ?
It's hard to tell with everyone named "Anonymous" but I'm the one who wrote about the employees carrying shovels and buckets behind the horses of acquisition. The company acquires its way forward as it has no development skills of its own but that shouldn't be news to anyone.
I find the reference to Arista interesting both in that their net income is barely more than 1% of Cisco's and that they (like Cisco according to the externally available Wikipedia page) walked off with their previous employer's technology (SysDB of all things - I know why their customers need support. At least they didn't get the API guide!) Huawei also sold Cisco technology without permission back in the day. Insert karma and lack of innovation jokes for all here.
Will Cisco be the perpetual maintenance machine it aspires to be? No, but there is a range of possibilities between immediate and complete failure and taking over the earth where it can remain an ongoing concern for a very long time even if it only drifts downward.
@L4faJdi-1jyv, you are in the company and in USA , Cisco is no 800 lb Gorilla! Huawei is eating Cisco's lunch in Europe, Emerging and APAC on the service provider. Arista is doing the same in large Enterprises in the same geo's . Customers say if Arista's support was not so patchy they would buy more Arista kit. If you are telling me Cisco will survive on America's enterprise market alone , you are smoking the same herbs as Cisco ELT :-)
BTW you nailed it on the head without realising it , when was the last piece of kit Cisco released that was a game changer ?
As for comparison to IBM , now this is a company that has made the transition to a software and services company,saying it at every GSX will not make it happen any quicker, doing something about it on the other hand may.
Or am I missing something!
1) Gross profit margins that have been largely growing for the past five years to 63.83% in the last quarter
2) Profit margins of 18.80% in the last quarter which is very near its five year average of 19.09%
3) Anyone who would drop $150B plus incentive to acquire the company without antitrust issues even knowing they'll get (some of?) the cash back
4) At least in their primary markets of routing and switching Cisco still holds the vast majority of market share
These aren't signs of immediate insolvency or acquisition. Add in the following:
5) GE disposed of 100,000 employees in the 1980s and is still employes over 300,000 people today
6) Parts of IBM have been blowing apart for decades and they still employ close to 400,000 people today
and it's clear that massive players covering many markets can continue as ongoing concerns. The difference is Cisco is still living as the 800lb gorilla in a high margin world and therefore has yet to put its executive team through any real survival tests. Given I can't get static IPv4 and static IPv6 addresses from Comcast because the two CPE providers (Cisco and SMC) can't make routers that will handle both protocol suites correctly it's clear even in areas where the barrier to entry is small there is little meaningful competition so I'm not seeing who is poised to eat tens of billions of Cisco's revenue any time soon.
@L4faJdi-1pgb: yep.
C.G. at least tried to get new young blood in the right way. He wasn't perfect, he had issues. But at least it was the right way to turn over to the new group. Then it stopped, and a huge gap occurred. C.G's kids have seen the mess and are ejecting. So the vacuum is huge. What a mess.
Last two posts have summed up all that is going on.
@L4faJdi-1ina: You summed it up perfectly. Now ya know why Chuck and Kelly light-up like they do when they talk about the repatriation/tax holiday. It is the only bullet they have left in the clip that will push the stock in a meaningful way.
Remember, those on the ELT past and present don't make their fortunes via take home salaries like the rest of us. It is all through investment income taxed at a much lower rate. Ordinary Income vs. Long Term Capital Gains via investments....big difference.
I wonder are the ELT banking on an Corporation Tax holiday from trump where they can bring home their money from offshore at a small tax price? This will allow them to buy back millions of shares and/or offer a one off bumper dividend to shareholders which will inject life into the market value. The ELT, who own millions of shares between them, will ride this wave and dump their shares at this inflated price which will have the accumulative effect of getting Cisco worse off that it started as the knowledge has been fired or left, market projections will become less optimistic as there will be nobody capable of pulling the right strings and navigating us to the right market, share price will fall back down and Cisco will be left with a bunch of millennials, H1Bs and a core team in India who are not up to pulling Cisco back on track. BUT, the ELT will have become rich in the process, and at the end of the day, that's all they care about.
ilax...and yet csco is laying off the 40+ year old veterans who built the company that held many promised rsu's. Then hire millennials as replacements and whine to trump about needing more h1b's. It is so many kinds of ethical wrong......
@L4faJdi-1qri, 150 Billion Market cap , 70 billion in cash , mostly outside of USA , mmmm could Cisco become an acquisition target ?
At a net 80 billion market cap , P&E ratio s---s, is that why all the layoff's and opex reductions ?
Or am I missing something!
No company is too big to fail , Motorola, Compaq, DEC, Tandem, Nokia Mobile, Ericsson Mobile, Alcatel, Lucent, Nortel, DEC, Sun, ...... names which no longer exist.
Cisco could just as well be HP, IBM, Microsoft or Oracle which are all dragging decades of broken legacy behind them. Even with DEC and Sun I can still buy new VMS and Solaris systems. Cisco's quarterly profit margin is very close to its five year average so I'm not seeing any signs of an imminent collapse.
Nortel, DEC, SUN etc the list goes on part of the circle of life Cisco will soon join the list.
The phone side of Nokia represented a very narrow spectrum of products in a market with explosive growth. Cisco is involved in many business segments and many of those aren't very competitive. With $70B in cash on hand they can buy or starve most major players in those weaker markets. It's not a growth story, but it's not going to be a fast collapse either. The existence of MPLS was the most public admission they have no internal development skills so the big question is can they acquire their way into a new growth market with enough barriers to entry to keep smaller faster players from eating their lunch?
People might have heard of Nokia? Not too long ago Nokia were the biggest mobile phone company in the world. Nokia's leadership team had a philosophy that only 'good' news should be propagated throughout their organisation. Everybody knew the smart phone was coming, especially those at Nokia, but they kept smiling and working on the wrong products because any negative talk was frowned upon by their ELT. They kept their heads in the sand for too long, giving themselves bonus' and complimenting each other on their greatness. Nokia no longer make mobile phones.