RE: Are Dark Clouds Gathering Over Cisco?

Date view Thread view Subject view Author view

From: Mark Day (
Date: Sun Sep 17 2000 - 01:53:01 PDT

[...] there's a growing
> feeling in the media that Cisco may have realized their peak.

"May have realized their peak" is one of those media phrases that dissolves
when you try to analyze it carefully. It could mean any of several different
things: e.g.
1. Cisco's price is headed down.
2. Cisco's price will stay flat.
3. Cisco's price will double, but it will take longer than in the past.

These are pretty different views of the future. Which is closer to what you
expect - down, flat, or slower rise? The analyst report concludes that it
won't continue its "meteoric rise of the past 5 years" -- well, duh. People
get paid to reach *that* conclusion? That doesn't really give you much
guidance about whether Cisco might still be better than alternatives in
terms of risk vs. return.

> analysts and reporters sitting on CNBC predicting poor stock performance
> tends to be a self-fulfilling prophecy.

In the short term, yes, especially for a stock as widely held as Cisco. But
keep in mind that analysts and press have a vested interest in exaggerating
the size of the changes. At Lotus, it was pretty weird to watch the
oscillation between "Lotus is dead" and "Lotus is back" stories over a few
years. My experience from the inside was not that we were having crushing
defeats and dramatic turnarounds but more just the usual day-to-day muddling
through problems and solutions in a fairly large organization. I'd say,
based on the volume of adulation about Cisco, the company's way overdue for
a long string of savaging, followed by some "it's not so bad after all"

Speaking of vested interests, readers will note that I am a current Cisco
employee and shareholder. For anyone who doesn't know, Ian is a former Cisco
employee. He'll have to tell us if he's a current shareholder, or perhaps a
short-seller. ;-)

> Everything significant about Cisco is driven by continued growth in the
> stock price: employee retention, realization of value after acquisition,
> and the power to form major alliances.

> If that curve is gone then there will be chaos as employees (notoriously
> underpaid and overworked, even by Silicon Valley standards) drive over
> other to leave the parking lot.

The critical question to ask is what the alternatives are. When compared to
many companies in the internet space that have cratered to a few percent of
their high, Cisco's recently flat stock price looks heroic. As acquisition
currency, the crucial comparison is probably to Nortel and Lucent, (maybe
Inktomi) and those stocks have their detractors as well.


Date view Thread view Subject view Author view

This archive was generated by hypermail 2b29 : Sun Sep 17 2000 - 01:37:12 PDT