Stock of the Day
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Cisco (CSCO)
Leading CEO Candidate Suddenly Departs Cisco
Shares of Cisco turned downward in early morning trading after the sudden departure of Mike Volpi, a leading contender for the company's CEO opening. Investors, unsure of how the company will adapt to continued VoIP growth without Volpi's expterise, initiated a minor sell off, but had changed their minds by noon. With Charles Giancarlo poised to take over the San Jose-based networking company, what sort of changes and shakeups can we expect in the upcoming year?
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| Stock Analysis |
Senior executive Mike Volpi resigned from the networking and IT company Thursday. The news sent shares somewhat lower. Such a move opens up the top executive spot for Charles Giancarlo, who currently serves as the company's Chief Development Officer. Volpi, a top candidate to succeed outgoing CEO John Chambers, indicated that his resignation was based on personal matters, but this did curb the shock of a potential CEO's departure in the middle of a running. Cicso's recent performance boost was partially led Volpi, who was in charge of the company's video strategy. Considering the power of Google's YouTube (GOOG: Charts, News, Offers) and increasing demand for broadband internet connectivity and Voice Over Internet Protocal (VoIP), the departure might do more than just eliminate a CEO candidate. Online video is expected to garner $7bn in annual revenue by 2010.
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With Volpi out of the race, what does this mean for the rest of Cisco's executive? Analysts aren't quite sure. One possibility is that upper management will continue to be shaken up. The departure of additional old guard management personnel could create space for more innovation, or at least give more room for production changes. A shakeup would bring about a level of uncertainty - which is an investor swear word, especially considering that the company has performed quite well as of late. Since August, shares of Cisco have rocketed from $17.64 to a high of nearly $29. A 64% shift in 5 months is a strong indicator of potential growth, which was supported by strong quarterly figures earlier in the week.
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As mentioned earlier, Cisco is one of the major providers of VoIP technology. While the company has concentrated on enterprise-level sales in the past, the move to consumer-side sales seems to be the next big thing. Its acquisitions of SA (2005) and Linksys (2003) moved the company closer to emerging trends, specifically relating to partnerships with companies like Skype, a peer-to-peer internet phone network. While Skype has not been as wildly successful as some had hoped, VoIP has blown up considerably. As major telecommunications companies push consumers to make the switch from dial-up connections to broadband, the need for networking services will continue to push Cisco sales upward.
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Cisco recently made headlines for a lawsuit involving Apple (AAPL: Charts, News, Offers) and its new iPhone. In a strange series of events, Cisco acquired Infogear in 2000, along with Infogear's trademarked iPhone. Apple, most likely realizing that it had to act internationally before it lost the rights to similar-sounding products, filed for iPhone trademarks in the UK, Australia, Singapore and the EU in 2004 and New Zealand in 2006. Only Singapore and Australia have granted Apple rights. This December, Cisco announced a line of products that would bear the iPhone name, ahead of the Apple conference that later announced Apple's own line of iPhones. While Apple's use of the iPhone moniker may feel like an intuitive move, the fact of the matter is that Cisco owns the rights to the name. The lawsuit won't be settled for several months or more, but indicators point to a likely licensing agreement.
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Cisco's stock was reiterated as "outperform" by BMO Capital Markets and Credit Suisse, mostly on the company's second quarter revenues estimates. The company is poised to benefit in shifting technological trends, specifically in regards to changing internet networking structures and future benefits from its 2006 Scientific Atlanta acquisition.
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Profile |
The Company's principal activities are to manufacture and sell networking and communications products. It also provides services related to this equipment and its use. It offers a wide range of products for transporting data, voice and video within buildings, across the campuses and around the world. The products of the Company include Routing technology, switching technology and network management software. The customers of the Company include corporations, public institutions, telecommunication companies and commercial enterprises. The international operations are located in Europe, the Middle East, Africa, Asia Pacific and Japan. In fiscal 2005, the Company acquired Actona Technologies, Inc, Airespace, Inc, dynamicsoft, Inc, FineGround Networks, Inc, P-Cube Inc, Perfigo, Inc, Protego Networks, Inc, Sipura Technology, Inc, and Topspin Communications, Inc.
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