Cisco: Slowing Capital Returns, Executive Departures, and Here
Comes HPE, Says Cautious Goldman By Tiernan Ray Shares
of
Cisco Systems (
CSCO)
are down 46 cents, or 1.6%, at $28.50, after
Goldman
Sachs’s
Simona
Jankowski this morning cut her rating on the shares
to Neutral from Buy, and cut her price target to $32 from $35,
writing that the company is “
running out of levers to
drive meaningful upside.”
With the stock’s yield currently at 3.6%, and its payout
ratio at 44%, capital returns are set to slow this year, she
expects, after $12.3 billion in debt raised over the last three
years and $3 billion paid out to Wall Street.
That’s just one of a few reasons Jankowski is cautious.
Another is a rejuvenated Hewlett-Packard
Enterprise (HPE).
HPE may be more competitive in
“campus” network switching, she
believes, after last year acquiring wireless
outfit Aruba Networks.
Cisco had been making gains in selling more and
more server computers against the
traditional fiefdom of the incumbents such
as Dell and HP. But Jankowski thinks
“largely exhausted now.”
She’s also concerned about the departure of
four senior executives, of which there was a
big brouhaha last week.
“The heightened executive turnover over the last 30 month
following the new CEO/CFO transition last year raises execution
risks,” she writes, “with the loss of Cisco’s
star engineering team behind Insieme Networks and 27 new leadership
in virtually every business segment and C-level
position.”
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