This week, Cisco Systems (Nasdaq: CSCO) announced a number of changes to its executive team, including the departure of Ned Hooper as its chief strategy officer.
You'd think losing a CSO would have executives taking the opportunity to reassess strategy. Not at Cisco. CEO John Chambers praised Hooper in a blog post while also committed to "partnering" with him as he moves on to lead a new investment partnership.
"Ned has a unique passion and skill for investment and strategy, and will focus on this in the next phase of his career," Chambers wrote. "Ned pioneered the model for large-scale M&A at Cisco and drove significant transactions for the company such as Tandberg, WebEx, Airespace, Starent and NDS. Additionally, he has managed our $2B investment portfolio with both strategic and financial returns to the company."
Returns to the company are one thing; returns to investors are another. There's really only one way to measure the success of Hooper's reign and Cisco's strategy: through the lens of returns on capital.
Cisco's ROC peaked in 1999 -- at 21.9% -- at what appears to be the beginning of Hooper's tenure. During his reign as head of strategy, from July 2009 to this week, returns on capital teetered between 7.6% in the January 2011 quarter and 11.1% in the same quarter the year prior. ROC touched 10.6% in the just-completed quarter ended April 28.
Not bad, right? Neither Acme Packet (Nasdaq: APKT) nor Riverbed Technology (Nasdaq: RVBD), two of Cisco's niche peers, has performed noticeably better than Cisco in this area.
Yet investors can be forgiven for staying skeptical. After all, Cisco may be shifting personnel, but the strategy that has led the stock lower by almost 14% over the past three years, and more than 45% since 1999, remains firmly in place, both of which lag the S&P 500 during the respective time periods.
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