24/7 Wall St. » john chambers

John Chambers Almost Taking Cisco Systems Private (CSCO)

247wallst — Fri, 16 Nov 2007 08:31:34 +0000

Cisco Systems (NASDAQ:CSCO) is seeing a pop in pre-market trading. The network and data communications equipment giant announced that at its board of directors meeting, the board authorized up to $10 Billion more to be used for additional share repurchases of its common stock with an indefinite time period. This will have increased the total authorized amount under the program to $62 Billion if this is fully completed.

This is only one part of the reasoning 24/7 Wall St. used in its assessment that Cisco stock shouldn’t have sold off to under $30.00 for a longer-term when you compare the stock at $30.00 in early 2004.
You can also look over the conference call commentary and see the John Chambers Q&A to see additional information.

Cisco shares are up 1.8% in pre-market trading at $29.85. Cisco’s market cap is $178.5 Billion, so if it will have retired $62 Billion when it’s all said and done it’s almost like taking themselves partly private. Cisco needs to remain a public company because markets change through time. But how many companies have spent that much buying back stock that have seen the steady success that this company has?

24/7 Wall St. has not issued its price targets for 2008 for Cisco and other key technology stocks. We’ll be issuing a summary of these in the coming weeks to our open distribution list before a more detailed posting of each target individually on the site here. Early in 2007 we issued a $34 price target for Cisco and that was hit right before the last earnings call.

Jon C. Ogg
November 16, 2007

Jon Ogg produces the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.

Cramer Interviews Mark Hurd, CEO of H-P (HPQ, MSFT, CSCO)

247wallst — Tue, 04 Sep 2007 17:22:29 +0000

On tonight’s MAD MONEY on CNBC, Jim Cramer said again that tech is where you want to be going into Q4, and if you don’t yet have tech that Hewlett-Packard (NYSE:HPQ) is the one stock where can still invest in easily in the sector. He liked the earnings numbers and the raised guidance, but Cramer already telegraphed for tonight all day as hosting a CEO Mark Hurd interview today. This is not one of Cramer’s NEW HORSEMEN OF TECH, but it is definitely one he’s been behind for quite some time as he called Hurd a transformational CEO. It is up 20% for the year, and here is what one of his favorite CEO’s said (answers are summary, not verbatim):

As far as what happened after Hurd took over? ANSWER: no tricks, just focused on fundamentals and worked on cost structure. Innovation, service, fundamentals.

As far as Chambers of Cisco Systems (NASDAQ:CSCO) saying this is the most bullish environment? ANSWER: Best days are ahead and not behind it.

Strength of earnings? ANSWER: 65% revenue is outside US, strong growth in consumer and mobility all help, plus discipline in spending.

Is Microsoft’s (NASDAQ:MSFT) WINDOWS VISTA Finally Kicking in? ANSWER: It is helpful, although they never expected a Vista moment.

On Component Costs helping ahead? ANSWER: They are largest customer so they get the best deal. It may continue to benefit.

Acquisitions? ANSWER: They buy leaders, data center automation is where they will lead.

As far as PC differentials from each other? ANSWER: DESIGN, SERVICE, SUPPORT, FEATURES, INNOVATION.

H-P now has $131 Billion market cap as of the close. H-P shares closed up 1.6% at $50.14 on the day in regular trading, and shares rose another 0.5% after the interview. By the way, today appears to be a year-high close.

Jon C. Ogg
September 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and he does not own securities in the companies he covers.

Cisco Multi-Year Stock Highs On Guidance (CSCO)

247wallst — Tue, 07 Aug 2007 15:56:16 +0000

Cisco Systems, Inc. (NASDAQ:CSCO) has boosted its longer-term growth expectations, and shares are now up 6% in after-hours as Chambers is finishing up his comments. Obviously the company can make other comments, but this stock is now above $31.00. That is a multi-year high and may put part of that $30.00 in the past if the market allows it. This may play into the scanrio that we felt could take this to a $34.00 summer target, and this is showing why Jim Cramer named it his #3 growth Pick out of his Top Picks for 2007. The networking behemoth posted $0.36 EPS on $9.43 Billion in revenues. First Call estimates were $0.35 EPS and $9.29 Billion revenues.

Opening Commentary (partial) from Chairman & CEO John Chambers: to maintain a strong growth rate is the initial comments, and stock ticked up there… strongest quarter in balanced sales in products, record quarter in sales and EPS… book to bill was above 1… repurchased $1.5 Billion in stock… Year over Year revenues growth: routing grew 14%, switching 18%, total advance technology grew 24%…. competition is robust but they believe they are taking market share in all areas… 17 of top 20 product families grew at 15% or better, services is 16% of revenues…. Chambers said the US business was strong and balanced despite perceived slowdown in technology… service provider business was very strong… saw acceleration in video and these will need continual network upgrades and grow that exponentially… wants to lead Web 2.0 technologies (he went on and on talking up Telepresence)… Best indication is order growth in high-end routers, and it saw accelerated growth of almost 30% in Q4 in high-end routers… believes it can continue growth… network is becoming the platform… convergence is winning… continues on acquisitions and partnerships… understands where industry is going over 12-18 months and then 3-5 year strategy… Growth over next decade will be second major phase of Internet from Web 2.0 and unified communications… says this can be instant replay of what happened for Cisco in early 1990′s.

The company said it is increasing expectations for next year but not focusing on short-term. Chambers raised longer-term guidance to 12-17% from 10-15% range previously given. Sees 2008 now 13-16% and revenue guidance for next quarter is 9.45 to $9.55 Billion (versus $9.38 Billion estimates).

This was also the fiscal year-end, so at $1.34 non-GAAP EPS and a $29.69 close the stock has a trailing P/E ratio (non-GAAP of course) of 22.15. With a GAAP EPS of $1.17 for the fiscal 2007 report, this has a trailing P/E of 25.3 for those who wish to be technical and use this on a comparable basis to many of the S&P 500 companies.

As a reminder, the company can always make some comments that change gains in after-hours. But the initial reaction is not showing this.

Jon C. Ogg
August 7, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Tech Tuesday: All About Cisco Systems & The Fed (CSCO)

247wallst — Mon, 06 Aug 2007 15:49:55 +0000

Tomorrow is going to be an interesting day after a massive rally Monday. The market is going to be looking to the FOMC for soem stability on the economic outlook and hope that Bernanke & Co. say they are carefully monitoring the slide from subprime into the rest of the economy.

Tech stocks will potentially have to wait for the market close before hearing Cisco Systems results for the quarter and fiscal year. Shares of Cisco barely made it into positive territory closing up $0.04 at $29.50 Monday. If you want a full earnings preview from Friday, you can see it here. Here are the basics if you just want the basics: $0.35 EPS and $9.29 Billion revenues. Next quarter estimates are $0.36 EPS and $9.38 Billion in revenues. If we get any fiscal July-2008 targets from the company, estimates are currently $1.55 EPS and $39.7 Billion in revenues. If the company only gives guidance in percentages for fiscal 2008 you would get a static 2008 to 2007 implied 16.5% gain in EPS and a 14% gain in revenues.

Even after the drop Friday, shares are up almost 10% over the last quarter. That $30.00 barrier is still an issue and has been difficult for the stock to hold. Analysts on average have an average target of $32.00 to $33.00, and we gave a scenario earlier in the year for a $34.00 target mid-year that has yet to be seen.

As a reminder, the company is in that new $5 Billion share buyback plan we thought was a bit odd only two weeks ahead of earnings and this is still one of Jim Cramer’s TOP 2007 PICKS. If Cisco upsets the market it may have additional fallout in the sector, particularly as the street thinks that they are the key leader winning more and more business in the sector.

Jon C. Ogg
August 6, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

What To Expect From Cisco Systems Fiscal 2007 Earnings Next Week (CSCO)

247wallst — Fri, 03 Aug 2007 08:53:52 +0000

Next week, on August 7, Cisco Systems (NASDAQ:CSCO) will post earnings for its quarter and fiscal year, and this will be the highlight of tech stocks for the week. Estimates from First Call are $0.35 EPS and $9.29 Billion revenues, but keep in mind that these may change slightly since there are three more trading days. Next quarter estimates are $0.36 EPS and $9.38 Billion in revenues. If we get any fiscal July-2008 targets from the company, estimates are currently $1.55 EPS and $39.7 Billion in revenues. If the company only gives guidance in percentages for fiscal 2008 you would get a static 2008 to 2007 implied 16.5% gain in EPS and a 14% gain in revenues.

Cisco’s shares have held up quite well when you consider the recent market malaise. Shares closed Thursday at $30.13, less than 1% from the highs of its $17.10 to $30.39 trading range over the last 52-weeks. The most important level for the stock would seem to the $30.00 barrier. This is above that level reached in January to February 2004 and the company is now far larger and executing far better. It also has the accumulated businesses of Scientific-Atlanta, Webex, and others under its umbrella. In fiscal 2004 the networking giant posted $22.04 Billion in revenues and it is expected to have roughly $34.75 Billion for this fiscal year (and estimated at $39.7 Billion for 2008). The company has also been retiring stock. So unless there are some more serious cracks forming across communications as a whole, it would seem that the company has a significantly higher base. We’ll see if the market believes the same.

The average price target is now around $32.00 to $33.00 from analysts. Back in January, we ran some forward valuations and the scenario that could give Cisco shares a $34.00 price mid-year. It hasn’t hit that based on the trading range, so now the rest is up to the company. The company just recently announced its increased share buyback plan, which we thought was a bit odd with shares at a multi-year high and it only being two-weeks ahead of earnings. Perhaps John Chambers and crew want to try to create a much higher floor for the stock. We’ll know Tuesday.

It is not fair to use options pricing as an estimate several days ahead of the event with erosion of time value, but as of today it appears that options traders are prepared for the stock to move up to 3% in either direction. That number is likely to change by the time earnings actually get released, and we’ll make an update on that next week. As a reminder, this was also one of Jim Cramer’s TOP PICKS FOR 2007.

Here is a May 8 preview we gave if you want to see any comparisons to then. Shares ended the last quarter under $27.00, so the stock is up about 11% since then.

Jon C. Ogg
August 3, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Why Does Cisco Need More Share Buybacks Now? (CSCO)

247wallst — Fri, 27 Jul 2007 09:25:52 +0000

Usually a $5 Billion add-on to a share buyback plan is a good thing for shareholders, or at least they take it that way. Last night Cisco Systems announced that its board of directors authorized an amount of up to an additional $5 Billion to be used for buying back stock. The previous plan had reached up to $47 Billion in stock repurchases, and there is no fixed termination date for this plan.

The company believes that this is the best way to return cash to shareholders. It also noted that in its entire buyback plan initiated since September 2001 (the worst month for the US since World War II) it has retired 2.2 Billion shares for some $41.7 Billion so far. That represents an average price of $19.20 per share, leaving $5.3 Billion as the remaining authorized amount.

But the question is, does the company feel it needs to use this stock-stabilizing tool when shares are at 5-year highs? It also makes one wonder if the company is having a hard time finding sizable acquisitions that it can add like its old Scientific-Atlanta deal. Cisco may deserve to go higher yet, but it should on its own merits. The company should either deploy this cash to make more strategic acquisitions of size. Or if it really wants to return cash it could try the one-time special dividend as an actual return of capital while tax rates are so low on dividends.
To top it off, $5 Billion in today’s value for Cisco isn’t what it was just last year. With shares near $30.00 and with the stock averaging over 50 million shares per day, this would really generate about 3.3 days worth of trading volume. If the networking and communications equipment giant wants to make these buybacks, hopefully it will only do so during periods where their stock is under pressure. We aren’t criticizing the company itself over this too much because the management is solid, but buybacks are supposed to be done when shares are weaker than the company would expect instead of at multi-year highs.

This doesn’t change any stance on John Chambers being one of the most entrenched CEO’s out there, but we’d still like to know if the company thinks this is the best use of current capital. There aren’t too many VMware opportunities out there like it also announced, but there are certainly other add-on acquisition or competition-killing opportunities out there.

Jon C. Ogg
July 27, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.