Dear John

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By wax
March 15, 2001

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I used to own Cisco stock. It was one of those long-term holdings I hoped would gain and gain and gain. Of course that was an unrealistic expectation, and I knew it, but hey, it never hurts to dream!
Back in October I sold all of my Cisco shares. It seemed to me the company was spending more of its resources lending customers money so they could purchase Cisco equipment. In other words, Cisco was getting into the lending business. Since I felt the only reason they were doing that was to increase sales in an effort to maintain what to me was an unreasonable growth rate, I figured it might be a good time to close my position.
There were two other things that led to my decision to exit Cisco. First, how many times can a company beat analysts' estimates by a penny? Eventually the odds of continuing that trend were going to go against the company. I reasoned that when that happened, analysts were going to pretty much crucify Cisco and it's CEO, Mr. Chambers. It was an "in your face" mentality that Cisco was subtly putting out there. And from what I had read, I got the sense analysts were just biding their time, waiting for the moment when Cisco stumbled.
The second thing I found strange about Cisco was their "new" technology. Juniper and Avici were developing and deploying equipment to utilize "next" generation bandwidth speed. Yet all Cisco seemed to be doing was talking about their "next" generation equipment. Cisco seemed stuck with a core product in the OC-48 world, when its competitors had moved to the OC-192 world, and in the case of Avici, to the OC-768 world. Anyway, I got out of Cisco, made a few bucks, and was happy.
Moving forward... For the past few months the "tech heavy" NASDAQ has been... in the dumper. Technology, other than two soup cans and a piece of string, has become a bad thing. Yet, given all this negativity about technology in general, I kept reading Cisco this and Cisco that. Mr. Chambers said today... blah blah blah. Mr. Chambers feels... blah blah blah.
Then this morning I read at the WSJ site, Mr. Chambers said, "We're seeing no turnaround in terms of orders". Mr. Chambers went on to add, "It has become difficult to forecast Cisco's results because no one knows when companies will begin to boost capital spending again. Some of Cisco's customers have cut their spending in half".
I guess my brain works differently than most folks', but here's what Mr. Chamber's comments made me wonder. Is Cisco not seeing a turnaround because its customers are buying newer technology from its competitors? How straight up is Mr. Chambers being? Is it really the economy, or have Cisco's customers grown tired of waiting for the company to deploy its new technology and simply gone elsewhere? In short, has Cisco lost, and is Cisco losing, market share?
I know. Why would I care since I no longer own Cisco? The reason is, seemingly negative comments like those made by Mr. Chambers have the potential to scare analysts and investors. Since Cisco is considered a bellwether in the tech world, these negative comments tend to move the markets downward. And, with the exception of one stock, all of the fatboy's holdings are in some form of technology. So the market dropping because some CEO may be trying to cover his behind... irks me. You see, the round one (moi) wants the market to go back up. Up is good...down is bad.
So, if what Mr. Chambers stated is accurate in the context of competition, fine. But if what Mr. Chambers said is accurate only in so far as it's "self-serving," which is what I think, shame on him. Shame on him and the horse he rode to town on!
It's my opinion (worth exactly what you paid for it) that Mr. Chambers should stop flapping his gums, roll up his sleeves and do the things that will add shareholder value. I have a feeling the shareholders would appreciate it, and I know at least one ex-shareholder certainly would!