Cisco's Troubles- Are They Really Surprising?

Today's Wall Street Journal has a piece calling attention- apparently in surprise- to Cisco's latest earnings disappointment. The article cites slowing revenue growth at the networking gear giant.

 Frankly, like a procession of formerly-consistently superior performing technology icons before it, including JDS Uniphase, Cognizant Technologies, Dell, Microsoft, and Intel, Cisco has been a total return has-been for quite some time.

The nearby five-year price chart for Cisco and the S&P500 Index show the firm has outperformed the latter over the period. But, upon close inspection, it's evident that the outperformance has really been in the brief period of the equity market crash between late 2008 and early 2009. Before and after, the performance patterns were similar, with Cisco declining to nearly the index's level by fall of 2009.

However, a much more revealing chart is the next one, spanning the public life of the firm. It produced shareholder value so fast in its early years that comparisons with the index are really pointless. But it's easy to see that, like Microsoft, Cisco has really 'enjoyed,' or, more pointedly, its shareholders have not, a lost decade. From its peak at the peak of the technology bubble in 2000, Cisco slid dramatically and really never substantially recovered.

I have checked my own records, and do not find evidence of the firm in any of my portfolios after early 2000. Between its dismal total return performance, relative to better-performing firms, and, I expect, slowed revenue growth, the firm joined the list I mentioned earlier in the post. Those technology firms whose charmed life of meteoric total return and revenue growth has slipped into history, almost certainly never to return.

Thus my amazement that pundits still put so much emphasis on the firm's every move. The information is clearly available for all to see- Cisco hasn't been a consistently superior performer worthy of long term holding for a decade. You'd have to be a market timer to have earned significant gains by owning the firm during that period. And if you simply bought and held, you'd be a big loser.

But, I guess analysts have to create interest and drama in order to be noticed and, well, get paid. As for me, I won't be expecting Cisco to be returning to its former, attractive performance profile of the 1990s, when it hasn't managed to do so in the intervening decade.