Cisco Systems Heeding Advice of Warren Buffett

Cisco Systems Inc. is heeding the words of Warren Buffett and getting greedy while others are fearful.

Cisco announced yesterday that it would pay $2.9 billion cash to buy Starent Networks Corp., which makes software and equipment for wireless carriers. 

It's the second cash deal Cisco has made this month. It also announced that it was buying Tandberg ASA of Norway for about $3 billion.

Following the Buffett mold, Cisco had squirreled away $35 billion in cash as of the start of this quarter. Sensing a market bottom, Cisco is now getting greedy with its cash horde.

The Wall Street Journal today quoted Cisco CEO John Chambers as saying the company would be "the most aggressive" it's ever been this year and next in making acquisitions.

Cisco was owned by a number of well-known value investors as of June 30, including Bill Miller, Bill Nygren and Ronald Muhlenkamp. Of the value gurus, Muhlenkamp had the highest allocation of Cisco in his fund's portfolio.

Cisco was The Muhlenkamp Fund's fourth-largest holding as of June 30, trailing only IBM, Bank of America and Oracle. Interestingly, IBM and Oracle also fit the bill of cash-rich technology companies getting greedy as the economy begins to improve,

The famously tech-averse Buffett would probably never invest in Cisco, at least in any meaningful way for Berkshire Hathaway. But that doesn't mean Cisco can't learn the lessons that have worked so well for Buffett and his shareholders.