I generally find New York Times op-ed economist Paul Krugman to be reliable and incisive in his dogged criticism of Bushonomics. But I think he missed the boat today in his comparison of Cisco with Enron. Cisco CEO John Chambers is participating in Bush’s wacky Waco shindig, and Krugman strains to suggest that, somehow, Cisco is like Enron. But the only complaint he musters — aside from noting Chambers’ overly handsome compensation, which puts him in the same boat as a gazillion other overpaid CEOs — is feeble: “The company’s specialty was using its own overvalued stock as currency — paying its employees with stock options, acquiring other companies by issuing more stock.” But as Krugman admits, that’s entirely legal; it’s also plain good business — when the market boosts your stock through the roof, it’s telling you to do something with that value.
Sure, Cisco’s stock, like that of the disgraced flagships of fraudulent accounting, was a darling of the bubble that is now way off its highs. But unlike Enron, Cisco is a company that makes stuff. Without its routers sitting in front of every industrial-strength Internet installation, you wouldn’t be able to read these words, or nearly any others online. Where Enron was engaged in building a phantom new-economy business in “energy trading,” and booking the sum total of transactions that it brokered as revenue (nice business if you can get it), Cisco builds and sells boxes full of electronics. I hold no brief for Chambers or his company, and if anyone can ever show evidence that they have engaged in anything Enronesque I will join the chorus of outrage. In the meantime, I’m glad their routers work well enough that most of us don’t even have to think about them.
