This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Why it's time for Cisco's John Chambers to move on

By David Levine

Having owned Cisco (CSCO) for many years, I am just as frustrated as many shareholders. The former internet darling of the tech bubble has lagged the market as well as its large cap tech peers. Additionally, Cisco seems to be challenged for growth.

So why should any sane investor buy Cisco at this point? The answer is simple: looking around at other large cap stocks within the sector, there is a clear way that Cisco's stock price will rise in the next 12-18 months in my opinion.

For the longest time it has never been about valuation. Cisco pays a dividend over 3%, and has a forward P/E under 12. The problem is that nobody knows where the growth is going to come from. Additionally, shareholders (myself included) have become increasingly frustrated with CEO John Chambers.

Although Chambers has accomplished amazing things at Cisco, many people feel that his departure is long overdue, and that he, like Steve Ballmer, should find a decent basketball team to buy and leave Cisco's operations to someone else.

In this way, the problem becomes the solution. Have you noticed how Intel (INTC) stock reacted when they replaced their CEO? Or how Microsoft (MSFT) stock reacted when they replaced theirs?

In terms of fundamentals, these gigantic companies have not changed much but their stocks have risen dramatically. I personally do not expect much to change at Microsoft, which is why I sold after their recent rise.

Cisco is in a similar situation and in the long run I'm not very excited. However, even the mere mention of Chambers' retirement could send the shares up 10%, toward my ultimate target of $32-34. My best guess, and it is only a guess, is that an activist investor (or Chambers himself) will cause this to happen within the next 12-18 months. That is why I am patiently waiting, collecting my 3% dividend in the meantime.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,157.17 +25.20 0.15%
S&P 500 2,003.90 +4.92 0.25%
NASDAQ 4,561.7490 +8.99 0.20%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs