With HP and eBay breakups already underway, could Cisco be next?

CEO John Chambers has said he wants Cisco to be the biggest IT provider in the universe. RBC Capital Markets Analyst Mark Sue thinks Chambers should break it up instead.

Given that [company]Hewlett-Packard[/company] is already bifurcating itself into an enterprise company and a PC-and-printer vendor, [company]eBay[/company] is breaking out PayPal as a separate entity, and Elliott Management is pushing EMC to spin out VMware, it’s clear that big companies are under tremendous pressure to “maximize shareholder value” by breaking themselves apart.

Sue’s take is that splitting up [company]Cisco[/company] could push the stock to $40 per share or more for the first time in 14 years and unlock value in high-growth areas including the internet of things, wireless and security arenas. “eBay, [company]Agilent[/company], JDSU and even HP this morning get high marks from investors for their ability to adapt to a changing world,” Sue wrote.

His take is that Cisco could put its traditional networking hardware — routing, switches — and associated services into a Cisco Solutions entity and put the more forward-looking aforementioned internet of things and mobile gear into a separate “Cisco Cloud” business. The traditional networking hardware business would be profitable  able to acquire related companies, consolidating selling power.

“Our surveys show Cisco has too many people, often takes too long to get things done and has become reactive to changing market dynamics,” Sue wrote. “Big layoffs and restructuring have become routine for the past four years. A more proactive change may kick Cisco’s underperforming stock into gear.

Of course it’s easy for Wall Streeters to weigh in on these tough management decisions — Talk is cheap. And, for the record, a Cisco spokesman said “we feel very good about our company strategy, our leadership, our innovation and our opportunities.”

Still, it sort of seems that breaking up is in the air and it’s unlikely HP will be the last IT giant to succumb in this climate.

Fork in the road, split

Feature photo courtesy of  Flickr user NASA Goddard Photo and Video