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Technology Stocks : CSCO, COMS, BAY

CSCO 76.04

-1.3%

Jan 2 9:30 AM EST

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To: Jon Ruder who wrote (75)	6/4/1996 9:48:00 AM
From: Jeff Raihanan	of 135

The STRM buyout could make CSCO go either way. The deal stipulates that CSCO will pay 1 share of CSCO or $50 for each share of STRM (whichever is higher). When the deal was announced, CSCO was at 46. STRM's 80M shares would make the buyout about $4 billion. Now that CSCO is hovering in the $54 to $57 range, the buyout could cost $300 to $600 million more than expected. This will make for a higher one time charge in July and could drag down the stock when Q results are released. On the other hand, STRM has been trailing CSCO by about 1/2 point. So, big investors have been shorting CSCO and buying STRM to profit from the price differential. Short sales in CSCO went from 9M shares on 4/15 to 25M shares on 5/15. When the deal is complete, those 16M extra shorts will be bought back which could cause CSCO to spike up several points. Since the shorts covering will happen before the Q report is released, I don't believe CSCO will dip to 50. I've been looking for a buy-in point myself and decided to buy at 54. I think anything under $56 is a good buy right now. Over the last 6 years, CSCO has averaged a wholloping 106% annual return. It would be a shame to miss another ride up in order to save a few percent. In the long run (several years if you believe in the buy and hold strategy) the small savings now will not be that important. -- Jeff

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