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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 78.37

+1.3%

3:59 PM EST

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To: Kashish King who wrote (33273)	4/2/2000 9:57:00 AM
From: John Malloy	Read Replies (1) of 77400

<<It's going to be increasingly difficult to grow the current 15 billion dollar revenue stream for a variety of competitive factors, even though the product volume and breadth may increase. When revenues do flatten out the company will be worth what flat revenue companies of this size are worth: 2 or 3 times revenues in terms of their market capitalization.>> I agree that it's going to be increasingly difficult for Cisco to maintain its past growth. That's why I forecast a drastic slowdown in growth in my previous post, and, along with slowing growth, a drastic drop in the price/book ratio investors will be willing to pay. But even with a drastic slowdown in growth and drop in the price/book ratio, Cisco is not wildly overvalued. It turns out to be fairly priced. You are much too quick to dismiss mathematical models. Build a reasonable model and feed it reasonable forecasts and you get a reasonable value for the stock. Your conclusion that Cisco will eventually be worth two to three times revenues is a mathematical model, although a crude one.

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