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Talking with
Cisco ANN ARBOR, Mich. (Dec. 1, 1997) -- Following the Cisco Systems (NasdaQ: CSCO) annual shareholders meeting on Nov. 13, Greg Markus (TMF Boring) of the Boring Portfolio interviewed Cisco's Director of Investor Relations, Mary Thurber, at the company's headquarters in San Jose, Calif. Q: Mary, how did you come to head up Cisco's investor relations department? A: I was attending Harvard Business School, and during the summer at the end of my first year, a friend who knew Cisco's treasurer suggested that I consider interviewing there. So I visited Cisco and got hired for the summer -- this was the summer of 1992. When I graduated the following year, I joined Cisco permanently, in the treasury department. I was involved in Cisco's first stock repurchase program and worked on mergers and acquisitions. At that time, Cisco didn't even have an investor relations department. When the new CFO, Larry Carter, came on board, he asked if I'd be interested in setting one up, and I said I would. Having had no previous experience in investor relations, the first thing I did was a lot of benchmarking -- finding out what it was that makes a good investor relations department. I talked with buy- and sell-side analysts and portfolio managers to find out what it was that they wanted from an IR department, and that's how we got started. We continue to learn every day about how we can improve. Q: Cisco's investor relations department has a reputation as one of the best. What makes a great investor relations department? The philosophy of our department is that no matter how small their holdings, all company shareholders are treated the way shareholders should be treated. We strive to return all phone calls and e-mail within 24 hours. We send out requested material promptly. If an individual shareholder requests access to a quarterly conference call, they get it. We often have hundreds of people on line for quarterly conference calls, and many more call to listen to the taped replay. Analysts and portfolio managers want an investor relations departments to have access to senior management, and we do. Here at Cisco, the IR department is within a few feet of the senior managers' offices. We can get answers to questions and reply to a caller quickly. We also set up appointments with management when analysts and portfolio managers visit Cisco. Analysts and shareholders alike also value an investor relations department that knows the company inside and out -- products, business strategy -- and that can answer even fairly technical questions accurately ... or else can find out the answer. We have three guiding tenets. The first is: educate, educate, educate. We put analysts directly in touch with the products people at Cisco, so that the analysts can develop a good understanding of the company and what it does and can therefore construct sensible guidance models. Second, never hype the stock. We want the stock to rise on the basis of the company's results. If Cisco produces as a company, the stock will take care of itself. Third, don't compromise long-term performance just to make analysts' estimates in the short term: don't be so focused on Wall Street's expectations that you do something stupid that compromises the company's long-term future. Credibility is, of course, wrapped around all of this. You've got to credible. If things aren't going well, you've got to come out and say so. Don't try to paint a rosy picture. Q: What's a typical day like for you? A: We're busiest when the market is dropping. We can get 20 or 30 phone calls from individual investors if the stock is down -- from folks trying to find out the reason for the drop. Earlier this year when the stock slumped, we were flooded with calls. A few of them were abusive. So you've got to be patient and not take it too personally. My days entail meeting with people here at Cisco, making presentations and attending financial conferences, spending a lot of time on the phone, organizing activities and making appointments for analysts who are visiting Cisco, and writing briefing materials for senior management. We organize the conference calls and get the script and press releases ready. We also answer email from investors and keep the investor relations information on the Website up to date. And all the while we're learning about the company and products and keeping up on what Cisco is doing. We also spend a lot of time on internal communications. We monitor what's happening in the market and among competitors and keep our management briefed about it. We also update senior management about what the stock is doing, so that they're kept up to date on that. Q: I remember reading an article earlier this year about investor relations at Cisco. I recall it said that you advise folks with questions to check Cisco's Website first. A: When an analyst calls with a question, I ask them first if they've checked our Website. There's a great deal of information available there -- and in greater detail than we could provide over the phone. So the first thing to do is: check the Website. Then call us. For example, our Website has a FAQ ["frequently asked questions"] that answers many common questions, such as: Do we have a dividend reinvestment program? (We're often asked that, even though Cisco doesn't have a dividend.) When did the stock split or when will it split next? When's the next quarterly report? Things like that. Q: When Cisco announced it's three-for-two stock split recently, we saw about as much discussion about that on our message boards as we did about the company's performance or new products. What considerations go into a decision to split the stock? A: The key question is: How many shares will you have after the split? Generally, you want to have approximately the same number of shares outstanding as your peer companies do. On the one hand, you don't want billions of shares outstanding, simply because it's difficult to administer all those shares. On the other hand, you want to keep the share price affordable to individual investors and on a par with the price of stocks of other companies Cisco's size. That was one reason why we elected to do a three-for-two split rather than two-for-one this time. A three-two split also leaves open the possibility of another split down the road. Q: How do you keep up with all the technical information about Cisco's products? Do you have a background in engineering or a related field? A: Not at all. I was a history major at Stanford. I still don't know lots of things about every product line, but I've taken some courses, and I learn a lot by going to our Website and reading what's available there. I also learn by talking directly with the product people here at Cisco. If I'm stumped by a question, I know who to call to get an answer. After you go to enough meetings with product managers and read a lot and research questions that others ask you, you get to know a fair amount. But you keep learning every day. Q: What's the coming year for Cisco look like? A: The opportunities are very exciting, but it's up to us capitalize upon them. Take the integration of voice and data, for example: think about how big the voice market is! That's a wonderful opportunity, but also a challenging one. When I first came to Cisco, we were routers, period. I was involved in the acquisition of Crescendo [in 1993], Cisco's first acquisition. From there, we've extended into new product areas, we've seen the rise of the Internet, and we're showing the way for Web commerce by selling products directly through Cisco Connection Online. Cisco's ability to provide end-to-end solutions offers many opportunities for growth. As an employee, I'm excited about that -- and I'm glad I have Cisco stock and stock options! Q: Do all Cisco employees have stock in the company? A: Every permanent employee has stock. Of course, the mix of cash versus stock compensation varies across positions, simply because some positions offer more ability to impact the stock's performance. But all permanent employees have an equity stake in the company. Q: What's it like to work here? A: It's a fun environment. We get a lot of "type-A" people here, and that makes it a great place to work -- because you know they are responsive, they pull their own weight, and they do good work. It can be tiring sometimes, because John Chambers asks a lot of everyone. But it's exciting at the same time, because he's such an energetic person -- and he let's everyone know that they're a valued part of the organization. It's a demanding company, too. You're expected to take risks, and with risks come inevitable failures. It's okay to fail, but you'd better learn from the failures and not make the same mistake twice. It's very aggressive, and it's a continuous learning environment. Q: Thanks, Mary. A: My pleasure. -- Interview by Greg Markus (TMF Boring) To the Boring Portfolio.
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