Cisco Chief Says No Layoffs ComingBy Reuters | Posted 2008-11-16 Email Print
CEO John Chambers promises to restore Cisco's growth and pay shareholders a dividend before he gives up his post. While forecasting down revenues, he says no layoffs in the works.
NEW YORK, Nov 13 (Reuters) - Cisco Systems Inc (CSCO.O: Quote, Profile, Research, Stock Buzz) Chief Executive John Chambers promised to pay shareholders a dividend before leaving the role, but did not say when either move would come.
The world's largest network equipment maker is known for its healthy cash position, and has held off paying any dividends. Instead, it has used capital reserves to buy companies, investing in its growth, and repurchasing shares.
"We absolutely will continue the share buyback program, and at the right point in time, hopefully when we have a better P/E, we will also, before I leave as CEO, make sure we pay a dividend," Chambers told a shareholders' meeting on Thursday.
The question of succession is a particularly sensitive one at Cisco, because there does not appear to be a consensus on who could be the next leader.
Chambers rarely comments on when he will leave the CEO post, although he told Reuters in July that the office of the CEO will be less hierarchical in five years.
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Analysts have said Chambers is unlikely to leave his role without seeing the company through the current economic downturn.
Cisco has forecast revenue to fall 5 to 10 percent in the current quarter from a year earlier and many believe Chambers is likely to stay at least until it returns to its long-term revenue growth target of 12 to 17 percent.
"I've got to believe that we're well over a year away from that. So one might presume that he's probably not going to be leaving for at least that time period," said Erik Suppiger, an analyst at Signal Hill.
Many say Chambers will be a tough act to follow. Since he took the CEO role in January 1995, Cisco has grown from a company with $1.2 billion in annual revenues to around $40 billion, as the expansion of the Internet fueled demand for routers and switches that direct Web traffic.
Chambers also said that while the company was pausing its hiring, he did not expect major layoffs and that it would continue to invest heavily in the United States. He added that he believes the U.S. economy will recover first and that Cisco would continue investing aggressively in the country.
Investors play close attention to Chambers' comments on the economy since the network equipment maker is seen as a bellwether for tech spending, and because he is considered close to government policymakers and other business leaders.
But not all his views have proven prescient. In August of last year, he said he was looking at the "strongest global economy I have been a part of."
Since then, a U.S. financial crisis has hit global economies, shriveling up corporate spending on technology equipment.
Cisco shares closed up 4.29 percent at $17.26, recovering in line with the overall market. They have fallen over 40 percent from a year earlier. (Editing by Bernard Orr)