In a six-page Fast Company article about Cisco this week, Cisco CEO John Chambers is quoted as stating:
| "In Russia, our leasing portfolio is more than $700 million, with one small write-down for only $200,000." |
Chambers' quote above really caught my attention because according to its Form 10-K filed with the SEC on Sep. 15, 2008, Cisco's $700 million leasing portfolio (the finance definition of portfolio is a collection of investments held by an institution) in Russia would represent more than 49% of Cisco lease receivables, net.
See related story: Welcome to the - Bank of Cisco
Note: Verified with Cisco the accuracy of Chambers' $700 million leasing portfolio quote in the Fast Company article above and received the following official response from Cisco:
| "Brad, there is some misinterpretation in the Fast Co article.
"The $700 million referenced is the amount of total product sales that were facilitated by all Cisco and third party financing activity in Russia in the last full fiscal year. "The actual lease commitments are a much smaller number, which we do not disclose separately as they are not material. "The $700M represents all the revenue that the financing function enabled in Russia in FY08, including customer financing and short-term channel partner financing." |
Additionally in the Fast Company article, when asked about Cisco's corporate reorganization and its $26.7 billion in cash, cash equivalents and investments, Chambers remarked:
| "Not only do we have the $26 billion, we now have 26 new market adjacencies that are not relevant to our revenue today, but they will be three to four years from now." |
The article reports that Chambers considers both the cash and new market adjacencies as vindication of his decision to reorganize Cisco.
However, most intriguing in the opinion of yours truly, is how the Fast Company article refers to the previous Cisco corporate culture, the one that made Cisco the most valuable company on earth, as being the "company's old cowboy culture." Chambers has replaced the "old cowboy culture" with councils and boards.
Curiously, during the article's reporting on how Chambers has redistributed the wealth among his executives by reorganizing its corporate culture into councils and boards, the words "Cisco shareholder" and/or "Cisco stockholder" were nowhere to be seen regarding Chambers' redistribution of wealth!
Note: Chambers did promise to his shareholders at the recent annual Cisco shareholders meeting that Cisco would be paying a dividend (although the timing was unclear: Chambers promises shareholders dividend but doesn't say when).
Finally, it was the article's last page which totally bowled me over, it reports that Chambers wants Cisco customers to remake themselves into Cisco's image:
| "Without changing the structure of your organization, I would argue that [innovation] will not work." |
Yours truly looked up the definiton of hubris:
| Overbearing pride or presumption; arrogance. In proverbial terms, hubris is thus the pride that comes before a fall. |
There is obviously no doubt that John Chambers is the most successful leader in the networking industry, but will that success transition into what the article describes as the new corporate objective of Chambers?
| "Turning Cisco from a technology company into a leadership consultancy." |
Related story:
How Cisco decides which market sectors to pursue
Could it just be possible that the suffering Cisco shareholders of today, long for those "Cisco saddle tramp corporate culture" days of yore?
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Brad can you offer a reason
Brad can you offer a reason why Chambers does not seem to feel he is a failure as a CEO since he has not made money for his shareholders in the last decade?
Look at the line chart of Cisco shares from 2000 until now. its flat, and even though the companies revenue has grown greatly the share price has not.
Worse yet is Chambers has not Kept his promise on dividends.
Very complicated issue
That is a very complicated issue that most certainly involves the Cisco options overhang.
The issue is complicated even further by the fact that Cisco already has such leading dominant market shares while being weighed down with huge worldwide scale.
However, it is my personal opinion that it can be simplified with this ironic statement:
Cisco has just been too darn successful.
Same thing happened at Home Depot (it also became too successful) as its former CEO Robert Nardelli doubled Home Depot's profits (while lining his pockets), the stock simultaneously sank in price!
No one can defy gravity forever, not even the most successful executive in the networking industry, John Chambers.
Nevertheless, Cisco's continued fabulous success has remained a huge money machine for its 67,647 employees!
It is my personal opinion that an outrageous amount of wealth will be created in the future by veteran Cisco employees who start new ventures or takeover troubled ventures that need their experience.
Sincerely,
Brad Reese
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