Cisco Sees Dividends in the Future

Cisco, like Apple, is famous for steering clear of dividends, but change is in the air.
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SAN JOSE, Calif. (

TheStreet

-- One of the many comments that flooded in during

TheStreet's

live blog of Cisco's (CSCO) - Get Report third-quarter results

asked whether the networking giant would start paying a dividend to investors -- a valid question given that Cisco sits astride a vast cash haul of almost $40 billion.

Cisco, like

Apple

(AAPL) - Get Report

, steers clear of dividends, preferring to pump its money into acquisitions and share repurchase. The switch maker, which

beat analysts' third-quarter estimates

earlier this week, currently has cash and investments worth $39.1 billion.

Cisco CFO Frank Calderoni

Cisco's shareholders have previously voted down recommendations for a dividend, clearly believing that the payment would stymie the company's growth. With Cisco firmly established a as networking behemoth, however, the mood in San Jose is changing. In late 2008, for example, Cisco CEO John Chambers said that he would

pay a dividend to shareholders

before stepping down from his role, whenever that might be.

Clearly, though, the dividend question is still intriguing to investors -- there is even a section of the Cisco Web site devoted to explaining its dividend stance.

"For now, we believe that the share repurchase program, combined with ongoing strategic investments in our business and maintaining a strong cash balance, are in the best interest of our shareholders," it says, but then adds that the company "routinely" evaluates the possibility of a dividend payment.

Comeback Companies (Forbes)

Cisco, which increased its share repurchase program to $2.2 billion during the third quarter, reiterated Chambers' dividend promise this week.

"A dividend is in our future," Cisco CFO Frank Calderoni told

TheStreet

during an interview on Wednesday. "We're clearly listening to what our investors are asking for us, as well as having discussions with our board of directors."

Cisco still has to determine when the dividend will be offered, says the CFO, noting that the company is still focused on its share buyback.

There are, of course, precedents for the shift towards dividend payments. Software giant

Microsoft

(MSFT) - Get Report

, for example, reversed its stance and made its first payment in 2003.

>>Find Ex-Dividend Dates With Our Dividend Calendar

Dividends, in addition to rewarding investors, are seen as a good way for companies to stabilize their share price. Cisco, however, must offset these benefits against the pressures of competing in new markets against the likes of

IBM

(IBM) - Get Report

and

Hewlett-Packard

(HPQ) - Get Report

, not to mention heightened competition from traditional rivals such as

Juniper

(JNPR) - Get Report

and

Alcatel-Lucent

(ALU)

.

With tech spending on the rebound, though, maybe now is the time for Cisco to dig deep into its pockets.

-- Reported by James Rogers in New York

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