Comments on: Cisco earnings wildly overstated: management milks shareholders for fun and profit

By: Sajal

Sajal — Mon, 24 Aug 2009 00:16:37 +0000

Back in the bull market days, I wrote this piece on companies doing share buybacks:
http://financialjoyride.blogspot.com/2008/05/why-you-should-short-companies-doing.html

I’ve been thinking of doing a follow up. This post provides food for thought. Thanks!

By: Michael F. Martin

Michael F. Martin — Mon, 17 Aug 2009 16:49:43 +0000

Agreed. And glad you located the source of the problem:

ask a US analyst for a model and he sends you just the P&L.

Managers are just doing what they feel is necessary to stay competitive. Only when the rules of the competition change will the behavior of the players change. Additional corporate governance rules won’t scale, as SOX has proved.

And agreed on the value of CSCO despite the inanity.

By: sdrawkcaBgnikroW

sdrawkcaBgnikroW — Mon, 17 Aug 2009 14:12:15 +0000

Excuse my ignorance, but is a loss due to vested stock options booked differently if there’s a buyback?
Are you just using the buyback information (+ number of shares outstanding) to estimate the size of these payouts?

By: Chetan

Chetan — Mon, 17 Aug 2009 12:36:06 +0000

I agree overall. However, one point (expounded in detail in Buffet’s letters to shareholders) that I would emphasize is the value of buybacks to return capital to shareholders (presumably because companies have no superior opportunities to invest in and are generating excess capital). This original intent is clearly not the primary objective for many companies as your analysis clearly shows.

Here again the solution, from Buffet, is to start treating options as compensation.

By: Virtual Memories

Virtual Memories — Mon, 17 Aug 2009 11:22:38 +0000

Great post! My only nit to pick is that pharma companies (the majors) aren’t complaining about being strapped for cash. They’re strapped for future cash, as their top sellers are on the verge of losing patent protection. Their complaint about regulating drug prices (and I’m not saying I agree with it) is that it’ll stifle innovation if they can’t generate the big money that pays for drug research and its attendant failures.

By: Matthew Lexus

Matthew Lexus — Mon, 17 Aug 2009 10:44:20 +0000

Fat cat Executives only care about one thing, and one thing only…Profit and excess compensation. I should know I was a Fat Cat Executive for many years… Matthew Lexus, Former Fat Cat Executive

By: Comrade de Chaos

Comrade de Chaos — Mon, 17 Aug 2009 07:59:09 +0000

Agreed. On the bright note, with the Tech at least you know the level 3 or derivatives won’t explode. My mistake, should substitute “you know” with “one hopes…”