Analysts who've lately focused on a Cisco's decade-long buying binge will surely weigh in on the networking powerhouse's Monday announcement that it plans to acquire Hong Kong set-top-box maker DVN. Yet most of these financial musings, which focus on Cisco's stock price, are missing the point. It's all about bandwidth, stupid.
A typical example of the kind of business writing I'm talking about appeared Tuesday in The New York Times's Dealbook blog, under the headline, "Does Cisco, the Nonstop Shopper, Need to Rethink?"
"Cisco has spent the last decade acquiring rivals and buying back stock. But investors who bought Cisco's shares a decade ago have received no return on their investment, Breakingviews says, and it's time to acknowledge that this strategy isn't working."
Without getting into a quantitative debate, basically the piece bases its "not working" argument on the fact that stock price and company earnings haven't risen at a rate commensurate with the size of the acquired companies.
Looking toward the future, a possibly more salient criticism takes note of the fact that Cisco now has 59 internal boards and councils to run its various lines of businesses. "This seems like a recipe for endless meetings, management confusion and reduced accountability," the Times blog writes.
Cisco's new meetings-centric management structure was explored this summer in a widely circulated Wall Street Journal piece, "Seeking Growth, Cisco Reroutes Decisions."
I get what Cisco CEO John Chambers is trying to do here--namely, establish a structure which can process inputs from a whole bunch of people, rather than just the same old hierarchical decision tree (aka the boss decides). Yet every corporate worker instinctively knows that a big meeting is not the venue for a frank discussion. ("Gee, boss, I think your idea really sucks.")
