Updated from May 6 Cisco's ( CSCO) John Chambers keeps trying to manage expectations, but Wall Street tends to be an unruly bunch. Reinforcing nuance to the point of obviousness, the Cisco CEO emphasized that there has been progress in the
struggle to return to consistent sales growth. Keeping his noted cheeriness mostly bottled up, Chambers sought to sell investors Tuesday night on a modestly bullish view of the rest of the year. Impressively, he pursued this goal by noting the "slight upward bias" in the company's fourth-quarter forecast -- one that, as expected, calls for sales to stay flat with third-quarter levels. For his part, Chambers pointed out that there's a world of difference between flat sales and the past three quarters of sliding sales. But the exec's mixed if upbeat-sounding message wasn't quite the tonic that growth-starved tech investors were looking for, even if it did come after the company posted solid third-quarter results. On Wednesday morning, Cisco slid 37 cents to $15.53.
While sales dropped in Asia in the latest quarter, an emerging worldwide health scare wasn't at fault, the executive said. "SARS wasn't a factor and won't be a big business issue," said Chambers. It all adds up to more of the same muddle that has confronted investors since the tech-and-telecom boom came to an abrupt halt in the summer of 2000. Despite continued progress in cutting costs, managing cash and buying back stock, Cisco remains hard-pressed to generate sales growth in a highly competitive market whose pursestrings are being held by penny-pinching big phone companies and corporate IT departments.
During the conference call, Chambers made an impassioned pitch for employee stock options. According to Chambers, employee stock ownership keeps critical tech jobs in the U.S. Chambers seemed to be speaking to lawmakers as much as shareholders as he lobbied for no major policy changes on stock options. Cisco itself has been pursuing a heavy stock-buyback policy to eliminate the dilutive effect of those options and return some of its huge cash hoard to shareholders. The company said it repurchased $2 billion worth of stock in the third quarter and plans to reduce its share count slightly in the fourth quarter through share buybacks. The company has given itself more than $8 billion worth of buyback authority in an effort to shrink its massive share count and put cash to work. The company also officially established Dennis Powell as the new CFO. His predecessor, Larry Carter, will retire this month as planned.