Come on, John. Manipulation is exactly what the SEC had in mind when they relaxed the buyback rules right after the attacks on the WTC. They WANTED companies like Cisco to prop up stocks until the panic subsided.
Now I don't think that is a long term solution to getting us out of our economic problems, but it has a sort of short term logic to it.
Anyway, as to what Cisco's management should be doing, they are doing it. They have slashed costs dramaticly, shut down buildings, layed off staff, cut bonuses, cut product lines, and attempting to reduce their o/s shares. They are doing all the right things. The problem is the demand for their industry's products has fallen through the floor. Even Cisco's reknowned marketing machine can't do much to get that demand moving again. Only time will cure that ill.
As far as needing $75 billion in profits to be worth $10 a share, I think you make things way to simple. Companies are valued on their future earnings potential, not their trailing twelve months earnings. So Cisco has several ways to attack their valuation problems - all of them related to boosting EPS: lower o/s shares, increase revenues, and/or decrease costs.
They are starting to lower o/s shares and they've already paired the business back by cutting costs. If they get 20% growth per year starting in 2003, and they get EPS back to $1, then they'd be worth near $20 by some people's measures. |
