Cisco Systems, Inc. (NASDAQ:CSCO) And The Story Behind The Buybacks


Dallas, Texas 02/20/2014 (FINANCIALSTRENDS) – Cisco Systems, Inc.(NASDAQ:CSCO) buyback, as with most other stock buyback received mixed reaction, as most investors prefer the use of funds in additional acquisition, cash dividend or reinvestment in the business itself. Though each of these possibilities have certain degree of limitations to it, the best path is the share repurchase as it creates long-term benefits for the shareholder.

Cisco Systems, Inc.(NASDAQ:CSCO) has chosen the buyback or share repurchase route to achieve higher EPS, as the repurchase and retirement process will lead to good EPS which has a higher impact on the other shares which are outstanding. Moreover, with buybacks the allocation of capital with the company are handled well, as long as the price the company is paying to buy the shares is not too high.

Cisco Systems, Inc.(NASDAQ:CSCO) has traveled a long way since 2004, during the course of which it has already sold and retired over 1.5 billion shares.

For Cisco Systems, Inc.(NASDAQ:CSCO) this has proved to a good strategy. The profits this communications major has been able to make has been remarkable.  The company’s profits was in the region of $9.98 billion, during the previous financial year. This was due to the prices of the shares fixed at  $9.98 billion and the current share count at 5.35 billion. The result was an EPs of $1.87. In comparison, the buyback has ensured better EPS and even better profits.  The end benefit is again to shareholders, the company analysts suggest. The company points out that the shares which were noted to have retired about 10 years ago were found to be receiving benefits for shareholders. Besides, the company also noted that the returns were in the form of higher EPS as well.

The bottom line for Cisco Systems, Inc.(NASDAQ:CSCO)  is well-lined with the exception of the fact, the telecom component major is inclined to issue far too many options and employee stocks than what investors are comfortable with.