Cisco: The fault lies in the stars, not the man

CEO John Chambers isn't to blame for Cisco's weakness, and neither is the company.

By Jim Cramer May 11, 2012 8:43AM

I come to praise John Chambers, not to bury him. It's become totally fashionable to criticize the CEO of Cisco (CSCO), and I can see it. The business has been decelerating each quarter while Chambers and company have continued to buy back stock, somewhat mindlessly, buying 27 million shares at $20.28 this quarter alone. Oops! Now it is $17!


But there is no denying that Chambers has put together a world-class team with world-class products offering an end-to-end solution.


But what's going wrong with the outlook at Cisco is a serious matter, and it is one that is not Cisco's fault. In fact, Cisco has made tremendous strides to become a less bloated, more aggressive institution, offering a diverse product line that sells into much more than just the telecom service providers and the enterprise. Cisco is the dominant Internet backbone, dominating the cloud, financial companies' tech needs and the needs of governments worldwide.


And that's where the problem lies: Cisco's everywhere, and with the exception of a couple of industries, such as the cloud and the data center players, these customers are very worried or are cutting back and cutting back severely.


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Cisco's salespeople are amazing. They are the first to know of slowdowns, and they are telling John of a real slowdown. He's then gotten deep into the organization and has confirmed that slowdown.


Some of that is cyclical and comes back. The enterprise can't afford not to spend to stay up with its Internet, telco and data needs. It can defer spending; it can't shut it down.


But the governments of the world? One of the amazing things that Cisco has done is to ingratiate itself to governments worldwide, and that has become a very difficult market. No, Cisco isn't offering solar solutions, ones that require subsidies, but it is providing services to ever-larger, ever-growing government needs when they aren't getting larger and aren't growing.


That's troubling. But it surely is not Cisco's fault.


I have little doubt that Cisco will bounce back. It's difficult to say when, though, because the slowdown is new and the chaos around the world, particularly in Europe, is too much for any worldwide tech company to continue to be bullish.


And it is not only Europe; our federal government has ground to a halt.  And that's going to hurt, too.


Nevertheless, there is no doubt that Cisco is using this moment to vanquish the competition, whether it be Juniper (JNPR) or Hewlett-Packard (HPQ) or Alcatel (ALU) or whatever Asian company might be trying to get into the game at any given time.


It's just that you can't blame Cisco for the weakness. It's rare that I ever say this, but this time, the fault isn't with Chambers, it is with the stars.


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the stocks mentioned.

May 11, 2012 3:37PM
I don't blame John Chambers for the economic slowdown in Europe.  I do blame him for taking his focus off of Cisco's core business and squandering billions of dollars in the process.  He seems focused now, but had that money been used to pay dividends instead of questionable acquisitions, the value of the company would be much higher today.  Even a 3% dividend would help establish a floor for the stock price and discourage speculators from shorting it.
May 11, 2012 4:20PM

maybe the cramer fans haven't seen my challenge yet so i will repeat it............

you post a cramer pick on this site and i will post my pick ..............we can then monitor the results

and see how good your hack scam artist can do against me............don't be afaid to back your

know nothing unfunny comic

May 11, 2012 4:14PM

more evidence:   cramer owns jpm in his trust because he says it is best of breed..........

his rigor and studying the fundamentals are again proved meaningless...............

his apology on cnbc this am was pitiful


his thesis of studying the fundamentals and beating the market by buying the best of breed individual stocks is again and again proved WRONG......................nobody can possibly know

about an individual stock..............anyone who thinks they can is fooling themself


properly hedged index funds is the ONLY way to beat the market over time


no wonder no cramer follower will accept my challenge to come on this site with a cramer pick



May 11, 2012 10:47AM
 Smile There's no moat around Cisco's business model and it has a growing list of competitors. Apple could one day be in that same position. Someone once said only  the paranoid survive.
May 11, 2012 10:05AM
If John Chambers doesn't take the blame for the financial results of Cisco at this point, then he should not be able to take the credit when things go up.  You can't have it both ways.  Many "leaders" take full credit when they had nothing to do with a success, but when things go south, they (in this case you) allow them to say "It wasn't my fault". 

Leaders lead from the front.  Simple statement.  Caretakers, sit in the rear with gear.
May 11, 2012 12:25PM

John Chambers should be blamed fro the mess Cisco is presently in. Just check his past performance and you will see what he has done to previous companies he has tried to lead. Well he did lead just in the wrong direction.


Take for example Wang Labs hired at its peak, was slow to acknowledge the PC market and left the company in a total mess to be sold off. Probably will do the same at Cisco removed my investment long ago when he was placed there as CEO, knew is was a real mistake from pass performance. Hope the Cisco Board wakes up and makes a change soon, only then will the turn around begin.

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