Cisco's Chamber(s) Of Horrors

                       television with an edge of hysteria in his gentlemanly Southern drawl,
                       announcing the Apocalypse as if it was Cisco Systems's (nasdaq: CSCO
                       - news - people) newest router. "A hundred-year flood can happen in your
                       lifetime," he publicly wailed back in April as his company's stock
                       collapsed.

                       Hardly the expected buck-up words from the head of the world's most
                       valuable tech company. What happened?

                       A year ago, Cisco was the darling not only of Wall Street, but of every
                       portfolio in America. The company's market value was greater than the
                       combined U.S. automobile industry--with the entire steel industry tossed
                       in to make up the difference. But more than that, Cisco had managed to
                       penetrate into the consciousness of Main Street, U.S.A., to a degree
                       unmatched by another technology company outside of IBM (nyse: IBM -
                       news - people), Apple Computer (nasdaq: AAPL - news - people) and Intel
                       (nasdaq: INTC - news - people). I remember being amazed while talking
                       to friends and family members who proudly informed me that they'd
                       bought tons of Cisco stock at nosebleed price-to-earnings ratios--and at
                       what would also prove to be market highs.

                       I'd ask them, "Do you know what Cisco does?"

                       "Sure," they'd reply, "It's like something to do with the Internet."

                       Like just about everybody else in tech, I submerged my own doubts about
                       Cisco. I wasn't dumb enough to buy stock in the company at those nutso
                       prices, but I also didn't go out of my way to dissuade loved ones from a
                       purchase. What if I was wrong? Everybody from their broker to the trade
                       press to CNBC was calling Cisco the wonder company of the age, a
                       can't-miss investment. Maybe I was the chump, watching the others drive
                       off down the road to router riches, while I was left behind in the middle of
                       the highway choking dust.

                       We all know what happened next. None of my near and dear had enough
                       invested to get killed by the Cisco meltdown. That miserable fate--thanks
                       to the alternative minimum tax --was left to all those Cisco middle
                       managers who exercised their options at a high price, then held their
                       shares hoping for a break on long-term capital gains. Those poor devils
                       are now wiped out, owing the Federal Reserve Bank millions in taxes on
                       shares that are now only worth thousands. In fact, most of the people I
                       know still holding Cisco stock have swallowed hard and dug in for the
                       long haul, in the belief that any company so valuable to the economy will
                       eventually regain its value.

                       That remains to be seen. What interests me now is the behavior of John
                       Chambers. Has there been in recent memory a comparable collection of
                       outbursts from a person at such a lofty level in American business?
                       Certainly there have been family feuds, like those pompadoured owners
                       of Crown Books and the carrion eaters feasting on Anna Nicole Smith's
                       wizened soul mate. But blood is different.

                       Perhaps the closest comparison I can think of is John Akers' last few days
                       at IBM, where he was frothing and banging on tables in mortal fear of the
                       collapse of "America's Greatest Company." As history showed, he had a
                       right to be worried.

                       Is that true as well for John Chambers and Cisco? Should my family circle
                       cut their already immense losses and run? How about you?

                       Having talked to compatriots around Silicon Valley, I can only offer three
                       possible scenarios for Chambers' behavior:

                       1. A House Built On Sand:

                       It has scarcely been reported in the press, but it will probably show up in
                       history books of this era that the downturn took the big tech companies
                       completely by surprise. Perhaps they should have known better, but by the
                       end of 2000, gravity itself seemed to be defeated. Sure the dot-coms were
                       starting to die, but the market was still strong. Orders for everything from
                       chips to servers were still rolling in. The old pros were growing tired of
                       playing Cassandra, their predictions proven wrong every time over the
                       previous four years. December 2000 orders too were looking strong.
                       2001-calendar-year planning was going into final approval rounds with
                       senior management, and there was no reason to believe that the new
                       year was going to be anything more than a slightly tempered reprise of the
                       one before. The boom would see a record ninth year.

                       Then all hell broke loose. What had seemed a continuation was in fact a
                       culmination. Customers closed out their orders and didn't renew. Worse,
                       half of the apparent demand turned out to be that old nemesis of tech:
                       multiple orders to guarantee delivery. Suddenly, one fulfilled or cancelled
                       order was in fact three or four. From chips to PCs to telecom, the market
                       seemed to evaporate overnight. Even the most prudent companies found
                       themselves with too much inventory and too little demand--hence the
                       massive burst of earnings warnings at the beginning of the year.

                       And Cisco? It had flown the highest, and so it took the most precipitous
                       fall. Worse, reportedly the company's sales force was still sending in
                       optimistic reports right up until the crash. So now picture John Chambers:
                       right through Christmas he's still getting reports that orders are strong,
                       and based on that he is still investing in the company's expansion, still
                       buying other companies... and then, almost overnight, the entire business
                       goes away. It would be enough to make anybody a raving crazy for a while.


                       2. The Wang Flashback:

                       A more psychological explanation for Chamber's behavior includes the
                       above, but adds another wrinkle--one that explains why his behavior has
                       been so much wackier than all the other CEOs in the same boat. People
                       often forget that long before he found fame and glory at the helm of Cisco,
                       Chambers helped preside over the last days of Wang Computer.

                       Wang was a fine company and a wonderful corporate citizen. It built
                       much-admired minicomputers and workstations and had justly achieved
                       revenues of $1 billion. Unfortunately, Wang fell victim to what we now call
                       a "category destruction." Technological advances suddenly made minis
                       obsolete, leaving Wang (and Data General and DEC) without a business.
                       It also didn't help that founder An Wang had also put his son, Fred, in
                       charge. In the end, Wang became like a runaway wagon heading down a
                       mountainside. No amount of steering or yanking on the reins could keep it
                       from disaster. Holding those reins near the end was John Chambers. The
                       experience must have been awful, even scarring.

                       Who's to say, whisper Valley veterans, that when Chambers saw Cisco's
                       numbers evaporate, he didn't flash back on the horror of Wang and fear it
                       was about to happen again?

                       3. Wrapped in the Flag:

                       Finally, this last scenario abandons the wacked-out Chambers in the
                       other scenarios for a more cynical one. George Gilder, who is often wrong
                       in detail, but almost always right on the big picture, has been pointing out
                       for months that Cisco is in much worse competitive shape than it seems.
                       The problem is legacy: The infrastructure of the Internet is rapidly moving
                       towards optical technology in order to handle the speed and bandwidth
                       that will be required by the next generation of the Web. Cisco, by
                       comparison, as the world's largest equipment maker for the Net, is
                       trapped in digital in order to support its enormous installed base. It is a
                       giant dinosaur trying to rule a world increasingly inhabited by tiny, fast
                       mammals.

                       Just as worrisome, Cisco built itself so quickly due largely through an
                       unequalled program of mergers and acquisitions. M&A is at the heart of
                       the company's long-term strategy--and with its stock crushed, there is no
                       money left for that. In other words, the company can't turn, and it can't
                       move forward.

                       Perhaps Chambers knew that. And if the stock collapse caught him by
                       surprise, it also presented an opportunity: Why not present Cisco's
                       problems as systemic, not structural--the consequence of being the
                       poster child of the new economy, not the victim of a bad business model.
                       Hiding behind a recession just might give the company an excuse to shirk
                       its legacy and buy time to change direction.

                       Which of these three scenarios do I believe? Probably the first, with maybe
                       a soupcon of the second. On the other hand, John Chambers is a very,
                       very smart businessman...  

hi Udo (Dr.... oder wie auch immer Du heißt).
Der Chambers der kostet Nerven.
Jeden Tag sitze ich mit meinen Freunden am virtuellen oder tatsächlichen Zockerstammtisch zusammen und jedesmal haben wir den absoluten Horror vor den chambers-news.
Die Aussagen von Chambers sind mittlerweile so haarsträubend und vor allem gegen jedes Firmeninteresse, daß wir uns fragen, ob wir nicht vor jeder chambers-rede einen Csco-PUT kaufen sollten. Meistens würde das klappen.
Einen größeren Volldeppen als Chambers hat die Finanzwelt bestimmt selten gesehen. Jemanden, der sein eigenes Unternehmen, die weitere Entwicklung und die gesamte Branche insgesamt als so negativ darstellt, so etwas gab es noch nie. Er könnnte auch sofort kündigen und die Firma beerdigen.
Chambers reißt die eigene Firma nur noch in den Keller und die restliche Branche gleich mit. Oder hat der Kerl nur PUTS auf csco gekauft ???
Es gibt nur noch eine Regel:
CHAMBERS = VOLLDEPP = VORSICHT NACH JEDER REDE....
****
CHECKIT

thank you Hans for this great article

was wird aus cisco in Zukunft,haben die wirklich noch Chancen "Marktführer zu bleiben,wenn ja was wird aus dem Kurs.??mfg

"A hundred-year flood can happen in your lifetime". Aber wenn er schon einmal den Konkursverwalter spielen musste, könnte das durchaus prägend gewesen sein. Vielleicht sieht er wirklich schon wieder die Felle davonschwimmen.

Oder sein Statement, dass das Quartal wirklich "challenging" sei...

Gruß Hans-Udo

Genau das ist die Frage, die sich alle stellen.
Haben wir hier die historische Chance einen echten Bluechip sagenhaft günstig zu erwerben, ober sind die glorreichen Zeiten von Cisco vorbei?

Beantworten kann das im Augenblick keiner.

Time will show...

Gruß Hans-Udo

Da Csco fundamental ok ist, wird sich ein Einstieg in der nächsten Zeit lohnen. Nicht heute, aber nach Bestätigung der Bodenbildung bei 20$. Ein Einstieg wird sich in den nächsten Tagen/Wochen auf jeden Fall langfristig lohnen.

Am besten wäre natürlich, wenn CHAMBERS seine Kündigung bekannt gäbe.

CHECKIT

vielleicht sieht er die Wahrheit etwas klarer als andere Fantasten? Er sagt nicht wie Ronnie Sommer alles wird gut weil wir die besten sind.
Und der redet ja nicht seine Firma schlecht, er sagt, der Konjunktur geht es nicht so gut. Es sagt nicht, die Leute kaufen keine Cisco-Produkte weil die Schrott sind. Er sagt, die Leute kaufen keine Cisco-Produkte, weil es der Wirtschaft schlecht geht.
Warum sollte er kündigen? Er hat diese Firma aufgebaut und zu dem gemacht was sie ist.
Aber ich glaub, dass Cisco noch sehr sehr lange brauchen wird um siene alten Hochs wieder zu sehen, wahrscheinlich eher gar nicht. Wie Hans in einem anderen Thread sagt, wankende Techs tun sich verdammt schwer den Anschluss zu halten. Und Juniper nimmt Cisco immer mehr Marktanteile ab.
Cisco hat zum ersten mal überhaupt rückläufige Umsätze. Und ist vom KGV garantiert nicht billig. Die Firma hat vielleicht zwei Drittel ihres Wertes verloren, kostet aber immer noch 150 Mrd US-$.
...
Taipan