Moneyline News Hour -- Aired May 8, 2000 - 6:30 p.m. ET
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Erik Gustafson, fund manager at Stein, Roe & Farnham, joins us now from Chicago.
Erik, welcome.
ERIK GUSTAFSON, STEIN, ROE & FARNHAM: Thank you, Willow.
BAY: You've long been a Cisco fan. Safe to say that you're still and you think that the "Barron's" article was a bit of a hatchet job?
GUSTAFSON: Well, Willow, I thought it was a shoddy piece of journalism, really, for a couple of reasons. The first is that the author suggests
that Cisco is somehow a Ponzi scheme or a pyramid scheme or a shell of cards, if you will. Well, Cisco happens to be the dominant company in
one of the fastest-growing industries in the world. Sixteen billion dollars is hardly a house of cards. If it is, I'll take it. Deal me in.
Secondly, I was disappointed with his interpretation of valuation. This is a journalist who really isn't competent to make that decision. I would suggest that Cisco, which has returned for its shareholders about 80 percent per year, is worth every penny that it is -- that the market says,
and that those that scream loudest about its valuations are always those that have never owned a share.
So, yes, Willow, it is fair to say I was disappointed.
BAY: OK, they are reporting earnings tomorrow. They have been remarkably consistent in beating expectations quarter after quarter.
Do you think they'll do that tomorrow?
GUSTAFSON: I think they'll do so again, Willow. The consensus number for the quarter is about 13 cents. I think you'll see at least 14 cents. You'll see the revenue line up over 50 percent since last year. Cisco is just in a phenomenal growth trajectory, and that's why we still remain
very positive on the stock.
BAY: What should we be looking for in that earnings report tomorrow, other than those growth numbers?
GUSTAFSON: Again, revenues...
BAY: Any problems, concerns? Go ahead.
GUSTAFSON: I don't think we'll see many problem. I think revenue guidance going forward will be very, very important. And the tone of the
call is always important with technology companies. What is management seeing? What is the tone of their comments on future prospects? That's always key with technology companies. I think Cisco's will be positive.
BAY: Erik, you could not be more positive about this stock. Is it a buying opportunity at this price? Were you buying today, and should investors
be buying at this price?
GUSTAFSON: We actually had buy tickets on the desk today. Yes, Willow, we were buyers of this dominant company. I think it is really a core holding. I think Cisco deserves every penny of its valuation. As I said earlier, you're buying the juggernaut in the game. I think it's time to go longer.
Erik Gustafson, thanks for joining us.
GUSTAFSON: Always a pleasure, thank you.
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