Viking Posted November 19, 2010 Share Posted November 19, 2010 It looks to me that each quarter a couple of large well run companies get their head handed to themselves. Not too long ago it was MSFT. DELL before that. What I like: 1.) long term track record; leaders in their field 2.) balance sheet: cash = $39 billion vs debt = $15 billion; net cash = $24 bill = +$4.00/share 3.) cash flow = $10 bill/year = $1.75/share (this is their number) 4.) announcement to increase stock buyback authorization to $10 billion What I don't like: 1.) stock option program: puts employees ahead of shareholders 2.) near term outlook CSCO is trading at $19.50 with $4.00 in net cash (and therefore no debt) = $15.50. GAAP earnings last 12 months = $1.36/share; PE = 11.4 (after cash). I REALLY like that they will be buying back lots of shares and likely implementing a dividend next year. I do think they will grow their per share earnings over time. When I weave it all together I like what I see (similar to MSFT when it was trading at $23 or DELL when it was trading at $12). Link to comment Share on other sites More sharing options...
Guest Bronco Posted November 19, 2010 Share Posted November 19, 2010 I bought the 2013 leaps 20 strike. Overreaction to the quarter IMO. Link to comment Share on other sites More sharing options...
omagh Posted November 19, 2010 Share Posted November 19, 2010 http://kellyherrell.wordpress.com/2010/11/12/cisco-competition-increasing/ LEAPS are probably the way to go. Cisco is fully penetrated in many of their markets and are vulnerable to competition as software routers on commodity Intel hardware become more common. Their Layer 3 router virtual monopoly is vulnerable to price competition from commodity routing software on commodity hardware. Selling $100 OEM-cost hardware routers for $3000 plus add-on software modules will become a thing of the past. Cisco's business model is predicated on selling a combined hardware and software package, but software virtualization in data centres is allowing people to unbundle all kinds of software including routing software. Once the router monopoly is seen as vulnerable, other parts of their monopoly will also be vulnerable to competition. That said, Cisco's customer base is sticky since "no one ever got fired for buying Cisco". Revenues and margins will more likely straightline than decline. -O I bought the 2013 leaps 20 strike. Overreaction to the quarter IMO. Link to comment Share on other sites More sharing options...
Guest bengrahamofthenorth Posted December 7, 2010 Share Posted December 7, 2010 Any thoughts on Cisco, it really got hit last month after the weak quarterly guidance. It has some pretty attractive features though. 70% market share in its core market, customer switching costs, broad portfolio of products. The company has some lofty 12-17% growth targets which is inline with its 5 and 10 year historical numbers of 15% but seems unlikely given its size. The high growth targets also increase the risk of an overpriced acquisition. However a small dividend is on the way and a new buyback for $10b was announced. The company is trading for: 14x trailing earnings, 9x if the cash is taken out, which seems pretty attractive to me. Link to comment Share on other sites More sharing options...
tombgrt Posted December 7, 2010 Share Posted December 7, 2010 Not sure if it will help you but I saw some value analysis and discussion of the company here : http://www.barelkarsan.com/2010/11/dominant-and-cheap-cisco-systems.html Link to comment Share on other sites More sharing options...
Guest bengrahamofthenorth Posted December 7, 2010 Share Posted December 7, 2010 Yes. I saw that website. Sorry I should have gave a tip of the hat to barel karsan. I was looking for some more detailed discussion. I'd love to hear some of the bear arguments (margins, competition etc.) Link to comment Share on other sites More sharing options...
rohitc99 Posted December 14, 2010 Share Posted December 14, 2010 cisco has an annual options award program of almost 3% outstanding stock. thats a lot of dilution. the stock is not as undervalued as it appears to be Link to comment Share on other sites More sharing options...
sdev Posted February 10, 2011 Share Posted February 10, 2011 anyone biting? I think it's worth taking a deeper look and doing some research on it. Link to comment Share on other sites More sharing options...
Myth465 Posted February 10, 2011 Share Posted February 10, 2011 anyone biting? I think it's worth taking a deeper look and doing some research on it. People said that a few months ago and are at best at break even and might have paper losses. I think its cheap but I dont understand Cisco and dont really feel like trying to. Link to comment Share on other sites More sharing options...
Guest valueInv Posted February 10, 2011 Share Posted February 10, 2011 The article overstates Cisco's moat. The Chinese vendors have copied Cisco's products to the extent that they look almost alike. And they are using that to beat Cisco in price, decreasing margins. Cisco has a shotgun strategy right now - everything from teleconferencing, cameras to wifi routers. It's not clear if they will be able to dominate the new markets. This is a company that succeeded by integrating acquitions better than anyone else , not by innovating. I would be careful with them. Link to comment Share on other sites More sharing options...
Carvel46 Posted February 11, 2011 Share Posted February 11, 2011 valueInv: You seem to dislike a moat that is built/retained/increased by acquisition. Why do you care, if the acquisitions are not overpriced? Good point on Chinese competition. Link to comment Share on other sites More sharing options...
TorontoRaptorsFan Posted February 11, 2011 Share Posted February 11, 2011 This is a company which has $40 billion in cash sitting in it's bank accounts. It's going to be the market leader for a long time to come. It's a great buying opportunity right now. Link to comment Share on other sites More sharing options...
Guest dealraker Posted February 11, 2011 Share Posted February 11, 2011 Run by the incredible, incredible, incredible, INCREDIBLE head dude who went right into the office of Arthur Levitt and threatened him with "I have friends in high places...and if you try to expense stock options..." (as per Levitt's book). And the same incredible, incredible, incredible, INCREDIBLE, head dude who sold over $100 million in stock (around $60 per share) within months of what was then the largest inventory write-off in United States corporate history. The same capital allocator who gave stock options to college students. Cash? Ha! Disappears fast when you pay 300 times earnings for start-ups as is necessary for the survival of "tech" (read "routers are old technology and boring, boring, BORING") companies. I believe, if I"m not mistaken, that the stock option grant values at one time exceeded sales? I did some entertaining research back in the late 1990's and I do remember that at one time Cisco's sales were close to Coke's and its stock option program was 8 times larger. Saying that, I have bought Cisco from time to time. Never held it long which is much different than my norm. The same behavior from Warren Buffett or Prem Watsa? Hell, they'd be in our "Hall of Shame" book. Every time "the MAN" come on TV with his sweet little voice I get a warm fuzzy feeling. Link to comment Share on other sites More sharing options...
Guest Bronco Posted February 11, 2011 Share Posted February 11, 2011 I would disagree. Chamber is a great capital allocator. He has bought back over $15 billion in shares over the past 3 - 4 years, helping the share price. What am I missing? Link to comment Share on other sites More sharing options...
sdev Posted February 11, 2011 Share Posted February 11, 2011 I would disagree. Chamber is a great capital allocator. He has bought back over $15 billion in shares over the past 3 - 4 years, helping the share price. What am I missing? Bronco I'm wondering the same thing. People can legitimately say that cisco has some issues right now, things that can be somewhat scary...but on the flip side, you have a business that has in absolute terms, really high margins, a huge cash pile, tremendous record of capital allocation..etc. Most important, it's share price relative to what it earns and what has been the trend with the share count seems cheap for a long term investor. Link to comment Share on other sites More sharing options...
rogermunibond Posted February 11, 2011 Share Posted February 11, 2011 I would disagree. Chamber is a great capital allocator. He has bought back over $15 billion in shares over the past 3 - 4 years, helping the share price. What am I missing? Just curious how many employee options/shares have been issued over the past 3-4 years? Link to comment Share on other sites More sharing options...
Guest Bronco Posted February 11, 2011 Share Posted February 11, 2011 I was being a little sarcastic on the buybacks though. Thought I would ruffle some feathers. I do think CSCO is a good trade though at some price. Too much cash. Too much free cash flow. Maybe buy under $19 and dump over $21. Of course, that assumes the business isn't in a secular decline. Link to comment Share on other sites More sharing options...
zarley Posted February 11, 2011 Share Posted February 11, 2011 I would disagree. Chamber is a great capital allocator. He has bought back over $15 billion in shares over the past 3 - 4 years, helping the share price. What am I missing? Just curious how many employee options/shares have been issued over the past 3-4 years? That's a good point. The way I look at it is to compare the net cost of repurchases and the impact that has on shares outstanding. Over the last 6 years (2004-2010), CSCO's shares outstanding has been reduced by about 1 billion shares, but CSCO has spent about $40 billion in aggregate repurchases over that time. So, they've spent nearly $40 per retired share at a time when the shares were trading in the market in the low 20's (sometimes over, sometimes under). My conclusion is that nearly half of their repurchase expense (a little under $2 billion per year on average) has been the cost of their options program. So, while they've certainly spent a lot on repurchases, half of it went into workers' pockets and not owners' pockets. I'm taking a hard look at CSCO right now because it does seem cheap, but not entirely convinced at the moment. Link to comment Share on other sites More sharing options...
frog03 Posted February 11, 2011 Share Posted February 11, 2011 What is the tax rate that Cisco has to pay to bring the cash back from the subs home? I understand Microsoft has similar issue of a very large cash balance that is mostly held overseas. Thanks! Link to comment Share on other sites More sharing options...
Guest Bronco Posted February 11, 2011 Share Posted February 11, 2011 Frog - impossible to answer that. If you have cash in Japan, you can bring it back tax free. If it is in Ireland, it may cost 25% to bring back. Canada may cost you 5%. It is all based on complicated tax calculations, earnings and profit pools for each foreign subsidiary, tax pools for each subsidiary, amounts repatriated, category of income repatriated, etc.... Very exhausting. If you are truly interested, print out form 1118 from the IRS website and read the instructions. My recommendation however is not to do that. Link to comment Share on other sites More sharing options...
turar Posted March 6, 2011 Share Posted March 6, 2011 One possible driver is IPv4 depletion and migration to IPv6. Everybody will have to migrate at some point, and currently only a few high-techs are doing so (Google, etc.). Cisco will benefit from selling IPv6 hardware. Link to comment Share on other sites More sharing options...
TorontoRaptorsFan Posted March 30, 2011 Share Posted March 30, 2011 I continue to accumulate shares in Cisco everyday! What a bargain! I really think the stock has been getting beat up more than it should. Has an extensive lineup of products and money is being deployed continually for acquisitions and R&D. It's now comprises about 80% of my portfolio. Link to comment Share on other sites More sharing options...
TorontoRaptorsFan Posted April 6, 2011 Share Posted April 6, 2011 Some really interesting developments today from Cisco. CEO John Chambers acknowledges that major changes need to occur for CSCO to move forward. http://www.marketwatch.com/story/cisco-shares-rise-on-ceos-change-vow-2011-04-06?siteid=yhoof http://www.nytimes.com/2011/04/06/business/06views.html?partner=yahoofinance Link to comment Share on other sites More sharing options...
TorontoRaptorsFan Posted May 17, 2011 Share Posted May 17, 2011 Bruce Berkowitz has initiated a position in Cisco. He acquired 35,818,600 shares in the first quarter of 2011. Link to comment Share on other sites More sharing options...
mevsemt Posted May 17, 2011 Share Posted May 17, 2011 There's been a ton of "guru" buying in addition to Berkowitz. In fact, I'm thinking about selling my common shares (to lock in the tax loss) and buying LEAPS - IMHO as the share price falls the margin of safety and potential return go up - so maybe it makes sense to move to a more aggressive investment... Thoughts? Link to comment Share on other sites More sharing options...
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