Another one form Merrril Lynch:
biz.yahoo.com
CHICAGO (Reuters) - Shares of Cisco Systems Inc. (NasdaqNM:CSCO - News), the No. 1 maker of equipment that directs Internet traffic, fell
more than the broader Nasdaq market and its peers on Wednesday after an analyst raised a "yellow flag" about the company's reserves in
case customers do not pay.
Cisco's shares fell 52 cents, or more than 3 percent, to $15.86 in afternoon trading on the Nasdaq. The overall Nasdaq
market was off 1.58 percent, while the American Stock Exchange Network Index was off 1.77 percent.
Merrill Lynch analyst Samuel Wilson raised a "yellow flag" on Cisco's allowance for doubtful accounts, which has risen to its
highest levels ever both in absolute dollars and as a percentage of gross receivables.
He said the growing allowance could have ramifications on earnings quality in the future, as a significant change in that
number could affect operating margins, or if used would result in previously booked revenues being questioned.
Wilson said Cisco's allowance for doubtful accounts in 1999 and 2000 was 2 percent of gross receivables, but has since
spiked to 26 percent, or $346 million, in the fiscal third quarter.
"We would naturally expect that during an economic downturn allowance for doubtful accounts would go up and I'm sure the
company would say it's just being conservative," he told Reuters. "It just happens to be up 13 times what is normal and it's
been going up while overall receivables continue to go down."
Cisco officials were not immediately available to comment, but one investor said there is a natural wariness in today's
post-Enron world, where people fear more accounting surprises.
"There's a lot of skittishness out there," said Henry Asher, president of the North Star Group, a New York money manager.
He said wary investors may wonder whether there is more to the story, possibly a huge write-down. He said Cisco officials have addressed this issues on previous calls,
saying it is not a concern.
"Right now, everyone in the telecom sector is absolutely guilty until proven innocent," Asher said.
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Bold by me. At least they are trying to be unbiased and honest. They are done with deceiving J6P from the long side. Hope they do not do the same from the short side.
After all when is this going to end. |
