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John Chambers appears to lack a true conviction that Cisco's stock price will appreciate in value
Mon, 05/17/10 - 10:47pm    Add your comment

Last week I blogged about the perfect timing demonstrated by Cisco CEO John Chambers when executing his insider Cisco stock trades. Interestingly, more than 7 years ago on December 6, 2002, Chambers' filed a Form 4 with the U.S. Securities and Exchange Commission, which revealed that Chambers' directly owned 2,047,199 Cisco shares. According to Cisco's Q3 2003 financial results, Cisco reported total net sales of $4.6 billion and net income of $987 million.

Fast-forward 7 years, Cisco reported Q3 2010 net sales of $10.36 billion (a 125% increase over Q3 2003) and net income of $2.19 billion (a 122% increase over Q3 2003).

New Update 5/19/10:

Chambers' most recent Form 4 was filed today, Wednesday, May 19, 2010, with the SEC.

In his filing today, Chambers' revealed that he now directly owns 2,626,942 Cisco shares (a mere 28.3% increase over December 6, 2002).

Chambers' filing also revealed that he sold this week $31.3 million in Cisco stock using 10b5-1 automatic trading plans. The earliest expiration date on the Cisco stock options Chambers sold this week? August 21, 2010. Over just the past 3 months alone, John Chambers sold a stunning $128.5 million in Cisco stock.

Clearly over the past 7 years, Chambers' percentage of directly owned Cisco shares has not kept up anywhere near the percentage growth in Cisco's net sales and net income.

Why could that be?

Well, in my personal opinion, John Chambers appears to be demonstrating he lacks a true conviction that Cisco's stock price will actually appreciate in value.

And why do I think that?

Because according to Forbes, back in 2005, Chambers had 5-year total compensation of $197.75 million.

Fast-forward another 5 years to April 28, 2010, Forbes again revealed that Chambers had 5-year total compensation of $195.43 million.

Adding those two 5-year total compensation amounts = $393.18 million.

Obviously over the past 7 years, John Chambers has had the opportunity as well as the financial means and resources available, to increase his directly owned Cisco shares the same percentage growth amount as Cisco's net sales and net income increased.

However, perhaps Cisco's stock price chart below, reveals why John Chambers may appear to lack a true conviction in Cisco's stock price appreciation potential:

Source: Yahoo! Finance

What's your take, do you think John Chambers has a true conviction that Cisco's stock price will appreciate in value?

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Cisco is not friendly to share holders, no dividend, no say, Options scam, buyback scam

By Lorenzo on Tuesday, May 18, 2010 at 02:36:29

Cisco executives own merely token Cisco shares

By Brad Reese on Monday, May 18, 2010 5:52 PM

Hi Lorenzo,

It's my personal opinion that Cisco executives own merely token Cisco shares:

Source: Yahoo! Finance

Furthermore, I also believe that Cisco's stock has become nothing more than a "stock index trading tool" for hedge funds trading stock market index futures.

Sincerely,

Brad Reese

Your article doesn't provide clarity

By Kranthi Kumar on Thursday, May 20, 2010 at 00:45:45

Your article doesn't provide clarity on the actual shares John Chambers owned vs Employee Stock Options.

Also, Cisco reduced total options being granted to all of it's employees to 1/4th of what it used to be from 2005 onwards i.e., after stock option expense law enforced. They also started giving only Restricted Stock Units (RSU) since 2008

Don't think that these change had an impact on the growth of total shares John owned?

According to John Chambers' filings with the SEC

By Brad Reese on Thursday, May 20, 2010 1:07 AM

Hi Kranthi,

According to John Chambers' filings with the SEC, over the past 7 years, Chambers has had ample opportunity (as well as the cash) to significantly increase his direct ownership of Cisco's shares.

So sticking strictly to the facts, over the past 7 years, even though Cisco's net sales have increased 125% and Cisco's net income has increased 122%, John Chambers' direct ownership of Cisco's shares has only increased a mere 28.3%.

Furthermore, yesterday on May 19, Chambers' filed a new Form 4 with the SEC that shows John Chambers sold $31.3 million of Cisco stock this very week.

Sincerely,

Brad Reese