Canaccord Genuity Morning Coffee on Cisco Systems (CSCO): Switching It Up
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Price: $111.04 +1.32%
Rating Summary:
35 Buy, 27 Hold, 0 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
35 Buy, 27 Hold, 0 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Canaccord Genuity Morning Coffee on Cisco Systems (Nasdaq: CSCO): Switching it up.
Canaccord analyst said, "The world’s largest maker of routers and switches rallied after CEO John Chambers vowed that change was forthcoming. In an internal memo circulated Monday, Chambers told Cisco’s rank and file that while the company’s basic strategy is sound, aspects of its “operational execution” have been weak. For this reason it “needs more discipline” in its business, he said. “We have been slow to make decisions; we have had surprises where we should not; and we have lost the accountability that has been a hallmark of our ability to execute consistently for our customers and our shareholders. That is unacceptable,” Chambers wrote in the memo, which was made public on Tuesday. “We have disappointed our investors, and we have confused our employees. Bottom line, we have lost some of the credibility that is foundational to Cisco’s success - and we must earn it back,” Chambers wrote. To that end, Chambers announced that Cisco will make a series of “targeted moves in the coming weeks” and as it transitions into fiscal 2012. Barclays Capital reflected on what these changes might look like. The firm suggested the most dramatic thing Cisco could do would be to divest its consumer businesses, such as the “Flip” video recorder products. “Our view, however, is that the “targeted moves” would be more moderate, with a de-emphasis on businesses like Consumer and modest opex reductions.” In addition, Barclay’s thinks several companies could benefit if Cisco were to “de- emphasize” the cable market (it owns Scientific Atlanta’s set-top business). Potential beneficiaries include Motorola Mobility (NYSE: MMI), Arris (Nasdaq: ARRS), Netgear (Nasdaq: NTGR), and Britain’s Pace PLC. Overall, Chambers’s insistence that “our strategy is sound,” implies to Barclay’s that the company will put more emphasis in future on core networking and switching. “We consider a heightened emphasis on enterprise markets in general, and networking in particular, to be a material positive,” it wrote. “We would hope one element of an emphasis on these markets would be a recognition that Cisco’s push for growth has overextended the company and that it would lower its long-term growth target of 12-17%.”"
Canaccord analyst said, "The world’s largest maker of routers and switches rallied after CEO John Chambers vowed that change was forthcoming. In an internal memo circulated Monday, Chambers told Cisco’s rank and file that while the company’s basic strategy is sound, aspects of its “operational execution” have been weak. For this reason it “needs more discipline” in its business, he said. “We have been slow to make decisions; we have had surprises where we should not; and we have lost the accountability that has been a hallmark of our ability to execute consistently for our customers and our shareholders. That is unacceptable,” Chambers wrote in the memo, which was made public on Tuesday. “We have disappointed our investors, and we have confused our employees. Bottom line, we have lost some of the credibility that is foundational to Cisco’s success - and we must earn it back,” Chambers wrote. To that end, Chambers announced that Cisco will make a series of “targeted moves in the coming weeks” and as it transitions into fiscal 2012. Barclays Capital reflected on what these changes might look like. The firm suggested the most dramatic thing Cisco could do would be to divest its consumer businesses, such as the “Flip” video recorder products. “Our view, however, is that the “targeted moves” would be more moderate, with a de-emphasis on businesses like Consumer and modest opex reductions.” In addition, Barclay’s thinks several companies could benefit if Cisco were to “de- emphasize” the cable market (it owns Scientific Atlanta’s set-top business). Potential beneficiaries include Motorola Mobility (NYSE: MMI), Arris (Nasdaq: ARRS), Netgear (Nasdaq: NTGR), and Britain’s Pace PLC. Overall, Chambers’s insistence that “our strategy is sound,” implies to Barclay’s that the company will put more emphasis in future on core networking and switching. “We consider a heightened emphasis on enterprise markets in general, and networking in particular, to be a material positive,” it wrote. “We would hope one element of an emphasis on these markets would be a recognition that Cisco’s push for growth has overextended the company and that it would lower its long-term growth target of 12-17%.”"
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