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Cisco is dead. It is dead as a technology play, its future is dead and it is dead money.
As a technology play Cisco is selling 15 year old technology (yes there were some small upgrades) but it is essentially selling decades old technology. Its new technology is still one year away said its CEO John Chambers on the earnings conference call. He said the sales cycle for the new products would take one year to close a million dollar sale. In that time the entire technology cycle could change. While Cisco is working on its new products, its core business is being decimated by China’s Huawei. They are selling similar products for 75% less.
Over the past decade Cisco fueled growth by acquiring start-ups. Today even that wouldn’t work, if it did acquire its fastest growing competitors such as Riverbed which is growing at 43%, Acme Packet growing at 40%, F5 Networks growing at 35% and Juniper growing at 20% it would only increase Cisco’s growth by 2% to 7%.
As an investment the Cisco shares have done nothing in ten years. In fact you lost 76% of your money by investing in Cisco. A $100 investment in Cisco would be worth $24 (see chart). It has been dead money. Today Cisco shares hit another low while the market is hitting an all time high. Now Chambers is talking about paying a dividend, with what? Cisco is experiencing margin compression.
The only thing that Cisco has got left is $40 billion in cash and it should use all of it to do a share buy back. That is the best use of the money.
I own Cisco and it is the worst investment I have made. Over at CNBC they say Chambers’ should go. Even if Chambers did go it will not solve Cisco’s problem.
Channels: cisco, dead, f5 networks, huawei, juniper, riverbed
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Pingback by Tweets that mention Cisco Is Dead -- Topsy.com — February 16, 2011 @ 1:13 PM
Chambers should go. The company needs new blood or else it will bleed green dollars!!!!!!!!!!!!!!!!!!!!!!!! My entire faith in this company is shaken. John Chambers should be taken out to Cisco Drive, unveil his bust or monument and then walk to the sunset in montana. Please go Chambers!!!!!!!!!!!!!!
Comment by oee — February 16, 2011 @ 1:21 PM
That's too bad. I still own some Cisco stock. I shd have dumped that 10 years ago.
Comment by vkmo — February 16, 2011 @ 1:23 PM
Keep in mind… $40b is not small pocket change…
It can and traditionally has gobbled up many fishes..
Also, from many large/medium enterprises around the world would like to stick with a trusted leader.
Analogy: Sony TV as compared to many players in market.
Yes, there is competition is technology segment and in geographic segments by asian companies.
Mind it, competition is good for everyone. So, I look at this as half glass full vs empty.
I think it is incorrect in people's expectations. This is where the problem is..
CSCO stock should be treated like INTC for apples comparsions, not with GOOG or AAPL.
I see csco stock will do well for many years to come.
It may not make investors millions but also it will not sink down like Lehman brothers…
Comment by macb — February 16, 2011 @ 5:50 PM
@macb: are you crazy cisco stock has lost 76% of it’s value in 10 years. It hasn’t dine well and won’t do well.
Comment by p roshen — February 17, 2011 @ 5:08 AM
Excellent post. About time.
Comment by Mubarak — February 17, 2011 @ 5:10 AM
Juniper is killing them!
Comment by IPv6Freely — February 18, 2011 @ 11:29 AM
There are some interesting cut-off dates on this article however I don’t know if I see all of them heart to heart. There may be some validity however I’ll take hold opinion till I look into it further. Good article , thanks and we would like more! Added to FeedBurner as well
Comment by Mitchell Obermiller — February 18, 2011 @ 10:20 PM
Interesting no mention of HP Networking which had 227% growth in Q4. With the acqusition of 3 COM they now have a portfolio equal to or better than Cisco with better performance, security, management and significantly cheaper being industry standard…..Cisco is DEAD.
Comment by Profit Hunter — February 21, 2011 @ 8:58 AM
I think the writer is DEAD. completely BS stuff – this writer has very little knowledge about the company and has almost no knowledge about the industry.
Comment by ABC — March 1, 2011 @ 3:59 PM
Re: "… lost 76% of your money by investing in Cisco …". This is true if you bought in the dot-com bubble (as high as $79/sh). But, LOTS of stocks lost that much – and more – in the crash. Now, if Mr. Baran were to have written his article on April 6, 2011 ($13.65/sh), he could say that Cisco is up Cisco stock is UP 32% in 10 years. There will be a lot of folks like Mr. Baran trotting out their "… lost XXX% in 10 years" warnings in the next few weeks just to get your attention. Can't do that much longer. Buyer (and seller) beware.
Comment by FirstPost — March 7, 2011 @ 8:14 AM
Cisco died years ago, YEARS!!! you are only seeing the results today…! Investing everywhere but in the USA, call centers in the amazon (you know what I mean) and finally the real picture……all the innovators are long since gone, cashed out before 2002 and either went to Juniper, Procket or other technology leaders that believes in innovation and developing from within or purchase core pieces but keeping within the business model. I remember customers around the world talking to me about the "arrogance of Cisco".
Comment by Cisco for 13 years — March 7, 2011 @ 9:30 AM
Some of this is correct…some. CISCO has been fueling its growth through acquisition for quite a while. Here is the chart for the last 1 year (http://www.google.com//finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=1&chfdeh=0&chdet=1300996800000&chddm=98923&chls=IntervalBasedLine&q=NASDAQ:CSCO&ntsp=0) showing what I’ve been calling the “dahling effect”. Investors want it to do good, and yet on earnings day the company disappoints and the stock gets axed. They have been resting on their laurels…leverging their name in lieu of advancing their technology. To be fair, computers and networking are tied at the hip and advances just aren’t coming as quickly as they used to. The value add companies can offer now seems to be in software…and Cisco is weeak in that area. CISCO is a bad company to own right now…but their technology R&D has been working hard lately and they expect to OWN the next generation of telecom. That’s positive for them…just hard to see it in the stock. I’ll be looking at them as their next product cycles are released and not before. Hardly dead…just hibernating.
Comment by VC. — March 24, 2011 @ 9:35 AM
The only place Huawei is beating Cisco is in China. Nobody in the US is buying Huawei products. Cisco's other problem is that the market outside of Asia is pretty soft for the last couple of years.
Comment by T. Hooker — March 24, 2011 @ 12:02 PM
Competitors wish the article was true. With the economy in the tank, few will come out the other side. Do you really think Cisco is not poised to survive in some form or another? IBM / GE / get it…
Comment by Faruk Janar — March 28, 2011 @ 2:46 AM
When time are tough, people look for cheap products, this is applicable to any industry, loo for McD, Doller Shops etc, This will not long last, when things turn good, people look for quality product as things improve.
Investors know that RVBD, F5, JNPR will do better than Cisco when economy is not doing well. Big investers like pensions, Mutual funds are diverted their funds to Bonds/CDs, Now its all thousands of Day traders who pump/dump couple millions over days, that is why stock is moving like a Small Cap,
When economy recovers, Big investors look for Stock market, then CSCO stock price will stabilise and JNPR, RVBD, F5 will be dumped.
You can expect -200% returns on RVBD/F5 etc.
Till then Njoy bad news..
Comment by Osaka — March 31, 2011 @ 4:46 PM
John Chamber should go and take responsibility for the mistakes the company made for the past 10 years. Instead 10,000 employee did that for him.
Comment by Ex-Cisco — September 22, 2011 @ 2:24 PM