Cisco Systems, Inc. (CSCO) Message Board

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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 76.60

+1.5%

1:56 PM EST

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To: The Phoenix who wrote (47541)	1/30/2001 4:26:15 PM
From: Stock Farmer	Read Replies (1) of 77400

Gary - once this comes into line (reduced inventories, slower pace of acquisitions, smaller acquisitions, reduced G&A, etc.) then cash flows from recurring operations will shoot up signficantly . When this "short term" spending of cash to grow dies out, yes the cash flow come on line. But the fuel for growth goes away. So growth will slow. It's a balance. Growth costs money. This is what makes discounted free cash flows such a useful measure. Those costs of investment are ADDED BACK into the cash flows on the assumption that the firm can choose to grow or pay shareholders a dividend, but the results of the investments are factored in as future growth. So you get a balanced picture. Those of us who do this math are not neglecting the "investment" factor. Not in the least. Your other point ...cash from tax benefits. I don't believe this will be a major impact however. In MHO tax benefit from stock option exercise could very well matter. It could matter a lot! MHO rests on the following fact. CSCO enjoyed 2.5 B$ tax benefit from stock option exercise in FY 2000. What happens if this stock price changes so the tax benefit goes down by 40% and stays down? Well, they cease to enjoy a benefit of $1B tax credits per year. Magnitude: $0.14 / share. Not minor.... JMHO. John

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