Merc columnist Scott Herhold recaps various political and economic happenings of the past few months and describes how they could impact San Jose’s and Lew Wolff’s ballpark plans. I won’t rehash all of them since we’ve covered them in great detail here. The thrust of Herhold’s piece is relevant: how long does this opportunity last? He also touches on a related issue that may or may not have real implications for the A’s: Is the Cisco in “Cisco Field” in jeopardy?
The story started a month ago, when Cisco Systems abruptly announced that it was killing its consumer video camera division, Flip Video. Flip was acquired by Cisco in 2009 for over half a billion dollars in stock. The acquisition was part of Cisco’s continuing attempts (and frequent failures) at breaking into the consumer space. Cisco is best known for making equipment that acts as the backbone of the internet, and CEO John Chambers’ desire to expand the brand into a more consumer-aware mindset came via acquisitions of companies like Flip/Pure Digital, Scientific Atlanta (cable boxes) and Linksys (home networking).
These acquisitions have had mixed results at best. While it’s generally acknowledged that smartphones with better-and-better cameras would eat into Flip’s market, Flip was clearly the leader in its market and it might have made more sense to either sell or spin off the division, which was based in Irvine, not San Jose. Cable boxes don’t seem to be getting better as a result of the Scientific Atlanta buy, and while Linksys hasn’t lost market share since it was bought by Cisco, it hasn’t really expanded share much either.
Cisco’s handling of consumer-oriented properties has made shareholders and institutional investors wonder whether Cisco is getting distracted from its core competencies. Frankly, it has and Chambers has admitted as much. It’s possible that shuttering Flip won’t be the last move the company makes, as Chambers reset growth expectations from 17% to 12% for this year. Cisco could sell all three of Flip/Pure Digital, Scientific Atlanta, and Linksys without even batting an eye, since according to Forbes, the equity value of all three combined is only 5% of the Cisco’s equity value. Such a move might impress investors enough to convince them that Cisco’s retrenching is not just all talk.
But what about the other stuff that Cisco’s doing? No, not routers and switches. What about the ads? These days you can’t watch a game broadcast on ESPN without seeing a Cisco TV ad. Cisco is pushing its Telepresence video conferencing product everywhere, from cute, quirky ads with actress Ellen Page to MLB Network’s Ballpark Cam to product placement in NCIS. Telepresence is not a consumer product, it’s aimed at businesses and enterprises, and is a major part of the company’s future. It’s unlikely that kind of advertising is going away. (Update: One analyst thinks Cisco should cut its marketing budget by 25%.)
Cisco Field is supposed to be a showcase for (when it opens) current and future technologies, a chance to make all of its “hidden” technologies more tangible for the public. Could Cisco abandon this quest in order to focus better? Perhaps. There’s only one problem with that. Right now it doesn’t cost Cisco a dime to have its name on this vaportecture Downtown San Jose ballpark. Cisco get mentions here and there by local and national media, and it’s all gravy. If a ballpark deal comes to fruition, they could drop the deal and let someone else pay for the privilege. However, let’s put this in perspective. Last year, Cisco’s operating income was $11 billion (on $31 billion in revenue). Naming rights for the Pacific Commons ballpark was to be $4 million per year. That puts the value of naming rights at 0.3% of income, practically a rounding error for a company of Cisco’s size. Yet if they moved forward they’d get huge exposure both locally and nationally. They’d also be able to elbow out a competitor the same way a ballclub might pick up a guy on waivers near the deadline just to keep him away from another team.
It might be that Cisco loses stature as the ubiquitous networking giant as competitors such as Juniper and Brocade start to horn in on segments Cisco has historically dominated. It doesn’t look like a situation in which Cisco is in any real trouble, nothing it can’t innovate its way out of. When you really sit down to think what Cisco is trying to accomplish with Cisco Field, if it doesn’t have great technologies to showcase, well there isn’t much point in putting your name on the building, is there? And if that’s the case, someone else will pay for the privilege to show off its own wares.
newballpark.org 
Damn RM! You put threads together late (is it 2am Pacific Time?). I guess you could say I’m posting late (or early) as well.
Simply put: Cisco isn’t going anywhere. $4 million annually out of $11 billion? At worst Cisco Field doesn’t become a great showplace of technology.
“Cisco” just becomes simply a name of a gorgeous Yard in downtown San Jose ;).
By the way, totally disagree with Herhold’s doom and gloom sentence at the end of his piece.
C’mon Scott! Funny he didn’t mention Wolff’s billion + dollar equity cash out. Oh well, I’ll still buy him a beer on Opening Day 2015.
Meanwhile, who has stepped forward to buy naming rights for a Victory Court ballpark?
I’m glad you back up your articles with logic and facts. It’s much better than some of the other blogs who just run with the negativity and don’t really add anything to the information except smoke and mirrors.
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If anything, these actions by Cisco show why it is in a strong position financially, even if it is having problems growing it’s consumer side. As for dropping Flip, I guess they decided that the tax breaks were better than just trying to sell it off to someone else. Maybe this way they get to keep the patents for potential use later?
Cisco’s stock is dead in the water– over 10 years now. If they do pull out, they’ve gotten 4 years of free press on a ballpark that may never get built. I do wish a company would come out for VC. Chevron, Kaiser or Clorox make too much sense.
@jk-usa – Clorox hasn’t exactly been a dynamic stock performer either. That’s the problem with being a leader in a well-established industry – there’s little buzz around the name. Chevron’s an energy company, and we all know they play by different rules. Kaiser? Non-starter for previously stated reasons.
@ML-Comparing the two stocks the last 2, 5, 10 years, it may surprise you. Clorox is about at their all time high. Cisco is 1/5th of their highest back in 2000 and can’t get any traction at all, regardless of all these huge profits. If you had $100k to invest in a company, it would be Clorox over Cisco. Sorry TonyD, but it’s the biggest no-brainer of all time.
@jk-usa – How exactly does the stock price factor into talk of sponsorships and naming rights?
If you look at stock prices for most all tech companies around the crash you’ll see that most of them are now a fraction of what they used to be.
For the last time…Cisco never said they wouldn’t sponsor a Oakland ballpark. They said they would stick with Wolff anywhere in the Bay Area. Would they prefer a SJ ballpark? Obviously! But they never said they would back out if Wolff were to build in Oakland. Can we please stop those assumptions. Again they said anywhere in the Bay Area, last time I checked that included included Oakland…my word
@LeAndre – That’s wonderful news!
Guys keep in mind that Cisco was one of the primary signatories on the letter from SVLG advocating for bs to allow the A’s to move to San Jose- so sure- they could still technically consider Oakland but it is not their first choice nor does it support their primary objective of having a ballpark close to headquarters to showcase this technology
Well two contributors to this blog keeping saying “who is going to provide naming rights $$$ for a stadium in Oakland?” well this might be a partial answer.
@David- Oakland is neither LW’s or Cisco’s first choice—-considering that as long as LW has the A’s, Oakland will not be his choice and that he and Chambers are friends and that the ‘9ers are looking for a naming rights sponsor in their backyard …than I would suggest the odds of Cisco purchasing naming rights of a ballpark in Oakland as fairly low–at this point Oakland needs certainty and actual committments not pie in the sky hopes–
Still, you’d think one of those fantastic east bay companies we keep hearing about would say something about naming rights for VC.
no dollar amounts have thrown around … but the LGO site does have several corporate sponsors. I assume they will be part of the total pie of corporate support.
Cisco put their name for the ballpark in Fremont guys not Oakland period. Lew Wolff will never build in Oakland without a “public handout” of some sort.
Without that handout there is no way a ballpark can get built in Oakland. Look at the model for all the other teams getting new ballparks (Miami and Minnesota) where the public put in a crap load of money for the stadiums.
California is a different beast as here we get taxed so much for the “weather”, no one is going to put $$ for a stadium to subsidize a sports team period.
Florida does not even have a state income tax and in Minnesota its a fraction of what it is in California.
No free handouts here Pro-Oak fans, San Jose can do it privately as evidenced by the SVLG letter and those companies can help by funding bonds via the city much like Anaheim was trying to do with the Kings where they city isn’t liable for any of it all the investors assume all the risk.
This is why Lew Wolff says San Jose is “shovel ready”…..the financing is so much easier in San Jose because no public handout is needed.
This is reality and Cisco will pay 4M to the A’s for naming rights as that is a great deal for them and the name will go across to all MLB cities in the US. The technology in the ballpark is secondary to the advertising….always.
Interesting story on Yahoo front page. It seems like two of SVLG’s leading companies are playing hardball with each other. Google v. Facebook. I thought it was all peaches and cream and togetherness in the South Bay?
@David: What does that have to do with the ballpark? Companies are companies. They are all trying to get ahead of the other. Should we bring up how Clorox is leaving wonderful Oakland? I thought everything was peaches and cream there, the place to be?
Brocade, Juniper and Cisco compete with one another. Facebook, Google (and to a lessor extent Yahoo) compete with one another. That competition actually works in the A’s favor when it comes to privately financing a stadium. Prominent sponsorship opportunities will be something most are interested in.
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Prominent sponsorships that companies will “fight” over is a large part of actually paying for the place.
Oakland is the place to be! Especially at an A’s game (i’m going tomorrow night!)
@LS–Clorox is not leaving Oakland. They did move a bunch of jobs out to exciting Pleasanton but their headquarters and many employees still remain in Oakland. They spent a ton of money to make their headquarters at City Center more green, so they’ll be there for awhile I hope.
FYI, their CEO is a member of LetsGoOakland. I still say they come out of the wood work and jump on VC. I hope Quan and Boxer are talking to them. I’m also glad to see my union boss Chuck Mack of Teamsters Joint Council 7 on LGO too.
Shaking head very, very slowly.
Lew Wolff will on with Monty and JD tomorrow morning at 8AM. Monty is asking A’s fans to send questions that they can consider asking to Wolff.
@tonyd “Shaking head very, very slowly.”
Better see a doctor for that, Tony. I shake my head at most of your posts and I’m perfectly healthy.
@jesse–i hope they ask him why he won’t jump on the VC bandwagon. And if it is picked by BS, will he sell or rot at the Coli, bitching every day.
For the love of Pete!…
I don’t see cisco pulling out. However the $120 mi contributionl that people like to throw around in these parts may shrink.
And can we please stop bringing up Cisco buying the naming rights for the Niners stadium. This is another accusation that just keeps being thrown around without any truth to it at all! Cisco never said they would be interested in buying naming rights for them. Just because they’re willing to name a baseball stadium doesn’t mean there going to do the same for football, which would at least be twice as more. Guys, John Chambers told Wolff they have “…a partnership for life.” remember…Only way Cisco even considers naming the Niners stadium is if Wolff abandons any efforts for a new stadium completely or sells the team.
Let’s just keep this one an “Oakland-only” thread fellas. Until next time…
@Tony: Have it your way…but as someone whose not an “Oakland Only” type, I choose to comment accordingly. I’m merely disagreeing with the idea that cisco isnt interested in buying a niners stadium name. Sorry if my pro Oakland reputation turns you off. And pro Oakland doesn’t mean “Oakland only”. Don’t know how many times I have to say that.
re: And can we please stop bringing up Cisco buying the naming rights for the Niners stadium
…if Cisco wants to show off its technology, a baseball stadium used 80+ days a year is a much better idea than a football stadium used 10 days a year.
Just heard Wolff on 95.7 … he said he tried in Oakland, etc. BUT he wouldn’t close the door on Oakland. Seem to say if the committee gave him a plan that works he would build in the town!
re: a plan that works.
As in, massive public subsidies, which won’t happen. Or, massive corporate support, which so far has failed to materialize in the East Bay.
If/when the committee gives him a financial plan that works, his choice would be to play ball or sell.
Same lines from Lew that he has been repeating for 2 years yet still says details are complicated. Color me unimpressed. Nothing new.
If the committee came back with a financial plan that worked, I don’t believe he would sell.
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This is really the first time that I have heard the committee was looking into financing plans (which is a good thing). I thought that was kind of the opposite of what Doug Boxer said on Chris Townsend’s show.
A financial plan that works in Oakland means MLB pays for the ballpark itself. Works for me. But it’s never happened before. MLB wants publicly funded stadiums