Cisco to start paying a dividend by next summer

Sep 14, 2010 By PETER SVENSSON , AP Technology Writer
In this Feb. 3, 2009 file photo, a Cisco Systems sign is shown at Cisco Systems headquarters in San Jose, Calif. Cisco, the world's largest maker of computer-networking gear, said Tuesday, Sept. 14, 2010, it plans to start paying a dividend before the end of its current fiscal year, in July. (AP Photo/Paul Sakuma, file)

(AP) -- Cisco Systems Inc., the world's largest maker of computer-networking gear, said Tuesday that it would pay its first dividend by July, the end of its current fiscal year.

Like several other big technology companies, Cisco has a large cash balance, and analysts have speculated that it would use it for a dividend.

Cisco CEO John Chambers said the annual dividend yield would be in the 1 percent to 2 percent range. The exact amount will be determined in the coming months while the company considers developments on the tax front and broader market conditions. Speaking at a conference for analysts and investors, Chief Financial Officer Frank Calderoni said the yield would be "competitive."

Cisco shares rose 26 cents, or 1.2 percent, to $21.52 in afternoon trading.

Technology companies usually prefer to invest their cash in themselves rather than return it to shareholders. In February, Apple Inc. CEO Steve Jobs told shareholders that he wanted to keep the company's $25 billion cash balance, which he said provides "tremendous security and flexibility." Dell Inc. and eBay Inc. are other holdouts.

However, once they reach the top of the industry, even technology companies find it hard to avoid paying dividend. Investors usually argue that the money is better spent on them than chasing further growth. Microsoft Corp. introduced a dividend in 2003 and now pays a 2.1 percent annual yield. Hewlett-Packard Co., which competes with Cisco in many fields, pays 0.8 percent.

Cisco, which is based in San Jose, Calif., had $40 billion in cash on July 31. However, $33 billion of that sits at overseas subsidiaries. Like other big exporters, Cisco has been reluctant to bring the money back to the U.S., to be taxed at the 35 percent corporate rate.

Because it needs some of its U.S. cash for other corporate needs, there's a possibility Cisco may have to tap its overseas hoard to pay a dividend.

Many companies took advantage of a tax amnesty for repatriating cash in 2004, and some have been pushing for a repeat of what was supposed to be a one-time event. Calderoni said that developments in repatriation rules would affect the size of the dividend.

Analyst Brian White at Ticonderoga Securities said the indicated dividend range, which works out to about $1.2 billion to $2.4 billion a year, wouldn't be "overly burdensome on the company's domestic cash balance." At the same time, it will likely widen Cisco's investor base, he said.

Cisco also indicated that taxes on dividends would also be a factor. A Bush-era tax cut is set to expire this year.

Cisco has been returning cash to shareholders through buybacks, amounting to $65 billion to 2010. Calderoni said the company is committed to continue doing buybacks and will continue to invest in research and design and purchase other companies.

Explore further: EU Parliament votes to break up Google

not rated yet
add to favorites email to friend print save as pdf

Related Stories

Cisco uses cash hoard to buy Norwegian co. for $3B

Oct 01, 2009

(AP) -- Cisco Systems Inc. tapped its immense cash hoard and announced a deal Thursday to buy Norway's Tandberg ASA for $3 billion in a bid to dominate the global market for videoconferencing equipment.

Cisco expands again, buying Starent for $2.9B

Oct 13, 2009

(AP) -- Betting on the growing popularity of data-hungry phones like the iPhone, Cisco Systems Inc. said Tuesday it had agreed to pay $2.9 billion for Starent Networks Corp., a maker of equipment for wireless ...

Cisco to proceed with $3.4 billion Tandberg deal

Dec 04, 2009

(AP) -- Cisco Systems Inc. says it is waiving its condition that 90 percent of shareholders of Norwegian videoconferencing equipment firm Tandberg ASA back its $3.4 billion takeover offer and will close the deal as soon ...

Cisco to buy ScanSafe for $183 million

Oct 27, 2009

Cisco announced on Tuesday it has agreed to buy Web security company ScanSafe for some 183 million dollars, the latest in a string of acquisitions by the US networking giant.

Recommended for you

EU Parliament votes to break up Google

Nov 27, 2014

The European Parliament voted overwhelmingly for the break-up of Google Thursday in a largely symbolic vote that nevertheless cast another blow in the four-year standoff between Brussels and the US Internet ...

Toyota finds new air bag issue, recalls more cars

Nov 27, 2014

Toyota Motor Corp. recalled more than 40,000 vehicles in Japan on Thursday as part of a worldwide scare over defective air bags and is investigating a new type of air bag problem that could lead to further recalls.

Netflix sues Yahoo CIO for alleged kickbacks

Nov 26, 2014

Netflix is suing a former company vice president who is now chief information officer at Yahoo, accusing him of receiving money from vendors he hired to work with the video streaming company.

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.