This article is gradually making my opinion of Cisco and CSCO, move closer to my opinion of QCOM. In both cases, I see a company that is gaining ground in its core markets, that owns the best technology, and has a consistent track record of making the best products. But.......
In both cases, I'm seeing a defective business plan, which results in the available cash flows diverted away from current shareholders. And that diversion seems to be a permanent part of the company's culture, not a temporary effect of the Bubble.
In Qualcomm's case, all the cash generated by chips and licensing, disappears into their Strategic Investment Division. And managment hasn't learned anything from repeated disasters, for years, in their various ventures. Globalstar was only one of a series of money sinks. Most discouraging of all, management keeps making those mistakes, quarter after quarter, year after year.
In Cisco's case, management seems firmly committed to managing the company for the benefit of employees, not stockholders. When employee stock options, properly expensed, make all your "profits" disappear, then something is seriously wrong (speaking strictly from the viewpoint of a non-employee stockholder). I believe in taking care of employees. But there has to be something left over for stockholders. In Cisco's case, over the long-term, averaging the good years with the bad years, there doesn't seem to be anything retained for common stockholders. |
