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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 84.82

+3.0%

Feb 6 9:30 AM EST

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To: GVTucker who wrote (45833)	1/3/2001 11:18:35 AM
From: Stock Farmer	Read Replies (2) of 77400

GV - Despite the fact that Phoenix is talking in turd, I think that he is trying to make a valid point. His statement that earnings directed as investments in startups don't reach the bottom line is hogwash. As you pointed out. But if I understand what he's trying to say, there is an economic cost to growth that is detractive to earnings as reported under GAAP. It doesn't happen as he says when they fund a startup. It happens when they purchase a company. I think he's talking about the writedowns of in-process R&D, ammortization of goodwill and so on. Classic free cash flow analysis stuff but garbled in the translation. I reviewed 2000 10K and see that adjusting GAAP earnings for depreciation, ammortization & writedown of purchased in-process R&D, partially offset by adjustments for interest and income from minority investments, we shift "reported" earnings by plus 20%. Not exactly the stuff I would use to justify a factor 2 premium in the stock price, but each to his own. John.

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