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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 78.34

-0.1%

Jan 30 3:59 PM EST

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To: The Phoenix who wrote (26837)	7/13/1999 11:54:00 AM
From: The Philosopher	Read Replies (2) of 77400

I hold CSCO and like the company, but was interested in your comment: Cisco generated nearly $2B in earnings on only $11B in sales generating 3 times (18%) the profit. That I suspect is the reason for the higher PE. Furthermore this argues that the businesses LU is in - as a whole - are lower margin. The other thing it could mean is that Cisco is vulnerable to lower margin competitors. I don't see that as a present worry, but it is a mid-term concern. If the margin really is a major factor in the high pE, then if the margin drops, the PE drops and the price drops like a rock. Does this worry you? Or do you have some reason to believe that CSCO can maintain its margins for the next several years?

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