You either didn't read, or chose to ignore, the post where I pointed out that Cisco is a monopoly, and virtually all network purchases today are expansions of existing LANs and WANs, and the enterprise customer (75% of Cisco's business) will purchase from the same vendor that he already has installed his network (usually Cisco).
I'm not ignoring it Elroy, I know what you are saying. But IBM was a monopoly once, far more dominant than MSFT now, are you old enough to remember that?
Thus your argument for margin pressure (which drives your whole theory) is wrong.
Cisco is indeed facing margin pressure, serious margin pressure in the high growth businesses like wireless, those wi-fi cards etc. In this case the pressure is coming from Dell who uses outsourcing a little more strategically than Cisco, jmo. Cisco has done some good things from a business perspective like a partnership with IBM so the thinkpad has Cisco wireless built-in- thats good but not much in the way of a future.
I'll tell you one thing I find interesting. For this entire year and since the bear market I have remained positive on the US tech industry in the face of a total onslaught from bears. (maybe not you I'm just talking generalities). It has been an attack on multiple fronts for these tech companies, the good ones like Cisco I mean- hedge funds shorting their stock, strongly negative commentary in the media, the stock options model which everyone knows these companies need to maintain their model being taken out and shot. The Bush tax plan with nothing for high growth businesses, in fact the net effect to tech in the Bush plan was negative, it favored oldline lowgrowth stocks, and a treasury secretary chosen from the railroad industry.
Now here we are after all of this and I can tell you that even I finally get it- US tech companies are not viable here. They used a model all through the growth periods that US investors won't support anymore, and receieved too much support from government in the past. Now, all I'm saying is that in light of this some hard decisions have to be made, I can take it- what about the rest of you?
I find it amazing that investors and government can launch a full fledged assault on these companies to the degree that they have and all of you are thinking "it won't matter things are just great". From a personal perspective I really hope Cisco can make it, I think its a great company but Chambers all but told you folks that he felt passionately about this options issue and I can see why- their company WON'T WORK without an options pay scheme. The future is bleak for Cisco, this is where the real leaders are made- lets see if Chambers can make the hard decisions, cut staff by 2/3 domestically and re-engineer- or, take the company apart and merge with IBM/Dell/Intel. |
