It was once the most valuable company in the world. The thing is
the company didn't sell whale oil or make typewriters. No, Cisco (
) makes the stuff that makes the Internet work. In other words, the
company should be larger now than it ever was, and its share price
trajectory should have mirrored hot names like Netflix (
) or Apple (
). instead the stock is off 81% from its March 2000 high. What
happened? I gave up on trying to understand the innards of the
company a long time ago, but in a nutshell, the company put it in
park with respect to imagination and urgency.
The story is a cautionary tale for all businesses, individuals
and our government. When Cisco announced yesterday it was laying
off 10,000 workers it wasn't about the macro economy, it was about
failed leadership. John Chambers has run the company for 16 of its
26 years and he has taken what was once mighty and admired and has
slowly made it an also-ran. Once famous for his cherry optimism as
his stock plunged in the aftermath of the bursting of the Internet
bubble, he has since taken a more cautious approach to press
conferences and company guidance. It also seems he got locked into
a more risk-averse manner for running the business.
I see serious parallels between Cisco and the United States.
Just as a great company can flounder aimlessly until it's no longer
great, a nation, even the best in the history of mankind, can do
the same. In May, Cisco said it would lay off 4% or 4,000 of its
73,000 workers in order to save $1.0 billion, a move that would
have been a major leap from its previous record round of 2,000
layoffs in 2002. Sure, the move is probably warranted now, but it's
the consequence of failed management. At some point, if things
don't change dramatically, the U.S. will have to face the music and
it's going to be worse than the direst of predictions.
Cisco's valuation is off $400 billion and it has made belittled
and tepid moves like the failed Flip camera that only underscores a
disconnection with greatness and the ineptitude of management. Just
as the board and shareholders became so enamored with John
Chambers, it seems voters can be fooled or seduced into sticking
with leadership that is clearly failing. There are analysts out
there saying Cisco can turn it around, Apple turned it around,
after all. It is true Steve Jobs came back to save his company by
engineering the mother of all makeovers, which included altering
his own beliefs to a degree.
Of course, Jerry Yang didn't save Yahoo (
) and his ego didn't allow shareholders to take a deal that would
have made them richer and the company more competitive. Now, we are
watching other would-be saviors, Michael Dell and Larry Page, back
at the helms of Dell (
) and Google (GOOG). But, let's be clear, these guys are founders
of these companies, not hired guns. I think they bring a level of
passion that can't be matched by an outsider, but they have
baggage, too. Yang's ego was too big, and the same could be said
for Steve Ballmer at Microsoft (MSFT). The right mix is someone who
has true love for the company but is smart enough to check the ego
at the door.
The stakes are obviously much higher for our nation than
shareholders of publicly traded companies. Yet, I look at Cisco's
chart and think the U.S. fits on there somewhere. I just don't know
where. Maybe our peak was the 1950s and then the 1980s rebound
under Ronald Reagan. The thing is that we still control our own
In fact, it's the ability to make Americans believe they still
control their own destiny that will be the key to our future. Cisco
has held onto a losing hand too long and its shareholders are
paying the price.
Speaking of Leadership
I think the rhetoric over the debt ceiling went from ridiculous
to dangerous. Harry Reid came straight out and said there would be
a crash if the debt ceiling wasn't raised, and President Obama said
he couldn't guarantee that Social Security checks would go out.
Mitch McConnell laid out a plan that was so confusing as to almost
be laughable, but we aren't laughing. Many are crying, and some are
quaking, because this is the position politicians put us in all the
time to get their way. We've come away from presidential pep talks
on real threats to a point where the goal is to get us all to run
for the hills.
I have to say the market is very jittery about all of this. The
stock market loves tranquility, not the tough talk on scores of
senior citizens, canes and walkers in hand, bombarding the streets
of America demanding their Social Security checks on August 3.
S&P Debt Downgrade: Could This Spark a Major