Here's why one of the biggest buyers of startups didn't buy many startups last year
Today, he followed up with a slightly more subdued keynote appearance at the Goldman Sachs tech conference in San Francisco, where he spoke a little bit about Cisco's acquisition strategy.
Cisco is known for buying startups. In fact, Chambers said that acquisitions had added an average of 2% to its earnings per year.
In 2014 Cisco was expected to make $4 billion to $5 billion in acquisitions, the Goldman Sachs interviewer noted. Instead, it did hardly any.
When asked why Chambers said that the company's acquisition strategy has not changed. "We still like small to medium-sized acquisitions," especially if they complement what Cisco does internally with its own startup-like teams.
But he gave three reasons why they slowed down a bit last year:
- Valuations. A lot of the startups Cisco looked were overpriced with high price-to-earnings ratios, Chambers said. "That's not a good decision for us, or for us as shareholders as well."
- Internal restructuring. Cisco underwent a pretty major reorganization last year, moving 40% of its employees around and breaking down individual business units to focus more across the company. Integrating acquisitions during that period would have been complicated.
- Taxes. Chambers has been harping against U.S. tax policy for years, as it requires companies to pay more than a 30% tax rate on revenues they make overseas if they bring that money back into the country for acquisitions (or for any other reason, like paying a dividend). As a result, Cisco still keeps most of its money overseas, and finds foreign acquisitions "easier." He is hopeful that Congress will pass a law proposed by Senators Rand Paul and Barbara Boxer that would create a temporary tax "holiday" for companies to bring home overseas money, but he put the chances of passage at less than 50%.
Overall, he wasn't quite as cocky as he sounded on yesterday's earnings call, but he did take a little time to boast that Cisco is doing better than any time since the 1990s.
"We're back in vogue," he said. "It's like the 1990s all over again."
In fact, Cisco is once again a hot place to work in Silicon Valley, Chambers claimed.
"It would surprise you how many were recruiting from so-called top players" like Google, Apple, and Facebook.
That said, Cisco did decrease its Silicon Valley headcount over the last year.
- I spent $2,000 for 7 nights in a 179-square-foot room on one of the world's largest cruise ships. Take a look inside my cabin.
- Colon cancer rates are rising in young people. If you have two symptoms you should get a colonoscopy, a GI oncologist says.
- Saudi Arabia wants China to help fund its struggling $500 billion Neom megaproject. Investors may not be too excited.
- Catan adds climate change to the latest edition of the world-famous board game
- Tired of blatant misinformation in the media? This video game can help you and your family fight fake news!
- Tired of blatant misinformation in the media? This video game can help you and your family fight fake news!
- JNK India IPO allotment – How to check allotment, GMP, listing date and more
- Indian Army unveils selfie point at Hombotingla Pass ahead of 25th anniversary of Kargil Vijay Diwas
- JNK India IPO allotment date
- JioCinema New Plans
- Realme Narzo 70 Launched
- Apple Let Loose event
- Elon Musk Apology
- RIL cash flows
- Charlie Munger
- Feedbank IPO allotment
- Tata IPO allotment
- Most generous retirement plans
- Broadcom lays off
- Cibil Score vs Cibil Report
- Birla and Bajaj in top Richest
- Nestle Sept 2023 report
- India Equity Market