mindmeld: You are telling me that of that $6 billion, most of it was paid by employees to Cisco in the form of options exercising?
No. Not quite. I am telling you that CSCO's business has three components. First, I define "The Business" as where they get their cash from.
In this light, the three segments to The Business are: (a) selling internet gear; (b) investment banking (purchase and sale of third party bonds and equities), and (c) selling pieces of itself.
I am discussing the relative importance of each to the overall cash position of the company. The place to look is under consolidated income. It is not accidental that this information is published in the 10K. Here are the numbers from FY 2000. You can check them yourself if you'd like.
The total comprehensive income generated from The Business over its lifetime is 26,497 MM$. This represents roughly $20 B cash & external investments + 6B investment in growth (purchases + pooling).
"Retained Earnings" accumulates the earnings from operations. This is what came from the side of the business that has to do with selling internet stuff. Total is 8,358 MM $ - or 32% of their business.
"Other Accumulated Comprehensive Income" is unrealized change in investment income. Total is 3,530 MM$ - or 13% of the business.
"Common Stock and Additional Paid In Capital" is sale of shares (option exercise = sale to employees) plus tax benefit of stock option exercise, plus a bunch of other things like selling shares to purchase companies. This represents 55% of the business! I zeroed in on the subset which is stock option related. That accounts for about 30% of the business (same as selling internet gear).
This tells you that 32% of their business is selling internet gear. The rest is investment banking (13%) and selling themselves (55%), of which the majority is through employee stock option exercise (selling shares to employees, banking the tax benefit in cash-not-paid).
More important however is the rate of change of these ratios over time.
The 6 B$ of "operating cash flows" you talk about consists of 2.6 B$ of earnings from gear, 2.5 B$ contribution from stock option tax benefit, and 1 B$ of misc puts and takes.
Add about 1 B$ from option exercise (176 M x 5.75 average) and you see that the stock option contribution to cash for FY 2000 was as big as that from the "internet" side of the business.
As to catching you out on your stock price prediction? Well, you're in good company. Check out the reply chain to: Message 13714234
The only one who was close was bambs. Go figure.
John |
