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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 78.03+0.8%Nov 14 9:30 AM EST
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To: Stock Farmer who wrote (47976)2/5/2001 3:32:12 PM
From: Tulvio Durand  Read Replies (1) of 77399
 
... you can reduce inventory by reducing how much you purchase at constant rate of sales.

A good manager does this all the time. That's the whole point of "just-in-time delivery" from suppliers. There's no value to holding more parts in inventory than needed. The lone exception is when supply is uncertain in which case one is forced to stock up. When supply is no longer problematic one should reduce excess inventory. That's good business practice. But what FD is suggesting is that Cisco is reducing parts inventory (certainly he would not consider malicious the reduction of finished goods) for the sole purpose of manipulating gross profit margin. That is counter productive, is not sustainable and doesn't make sense, ie., it would imply that Cisco has been holding on to excess parts inventory for the sole purpose of using it up when they needed a profit boost -- just doesn't make sense.

Tulvio
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