Two thoughts:
There are a couple of very significant differences between the environment now and the environment in 1997.
First, in 1997, CSCO stock was between 5 and 10. In FY 97, CSCO earned 23¢. That means that for the entire year, CSCO's PE was between 21 and 43. At a current price of 53, CSCO is at a PE of 98x current year earnings. Earlier this year, of course, the PE was even higher.
Equally as important, in 1997, the CLECs had a very easy time raising money. I am talking about corporations like TGNT, WCII, etc. CSCO sells a lot of gear to these companies. Right now, secondary CLECs are going broke, and the capital window for even higher tier CLECs like TGNT is pretty much closed. In addition, revenue growth for the larger players is slowing considerably. Finally, with capital markets closed to most money losing dot coms, this cuts off yet another of CSCO's markets. |
