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Cisco Systems, Inc. Message Board

  • rr75_85 rr75_85 Dec 12, 2013 6:05 PM Flag

    Why $50 billion in Cash?

    Why not pay off debt and extend buyback by 50% of annual cash flow? The bottom line would jump. No??? There is value here.

    Sentiment: Hold

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    • the debt is not really a big deal. CSCO has a debt/equity ratio of .23 and interest on the debt really isnt that much.they retired some of the debt last year. not a bad idea but not top priority imho. buying back the stock would do the most to bolster the income statement if the stock price gets too low. but i think that increasing the dividend will bring some of the institutional investors back who sold before or bring some new ones in. from what ive been hearing from the management it sounds like theyre going to increase the dividend. thats just me trying to read the tea leaves. i could be wrong.

    • I think over 80% of that $50 billion is in overseas accounts and would be subject to US income tax if repatriated for a dividend or buyback. See what happens to the dividend. They've paid 17 cents three quarters in a row and a new declaration is imminent if they are going to pay one in Jan. Barrons reported that Chambers told the big shareholders last night that he wouldn't let them down and that he was going to ger the stock moving. At least today it went moving south.

      • 2 Replies to rlb799
      • There are ways to use the cash, but what I'm saying is different. They already have a $15B buyback. I would increase that buyback. $15B over 12 months and an additional $35B, using 1/2 of their annual cash flow. The CFO wants to reward shareholders. I don't think he wants or needs an Icahn type to push him. CSCO has dropped into the basement. I may have to hold this a year to see mid twenty's but it's like money in the bank and the dividend pays for the wait. Of course the price may revert to the mean, especially since the value is compelling. The instant gratification traders provided a nice opportunity for long term investors to buy right. I remember how the street felt about Apple not to long ago. The value was there too. It wont take long until funds start building a position. They probably already are.

    • There is always value somewhere in the market though not without risk. This is a buy low given the p/e. Once the bad news calmsit will go back up to the 23-24 level.

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