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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 77.80

-0.3%

Nov 17 3:59 PM EST

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To: Tulvio Durand who wrote (48079)	2/6/2001 12:44:32 AM
From: Stock Farmer	Read Replies (2) of 77400

Tulvio - careful. You stated I am "suggesting that Cisco's inventories will show a drop ... in what [I] perceive as the only way Cisco will meet earnings projections". Please don't put words in my mouth. I have made no suggestions about what tomorrows inventory numbers will bring, nor how I perceive CSCO can meet earnings projections. I have pointed out to you that it is possible to have inventories grow or shrink decoupled from earnings growth or shrink. I (more correctly, FD) have identified that inventory growth provides a stealth boost to earnings (and vice versa) despite what Gary might say to the contrary. I am suggesting you want to watch what happens with inventories, with earnings, with option tax benefit and a host of other well or less well known things that go into the sound-bite earnings report. And at the risk of flattening my forehead against a wall of denial I am also exploring the reasons why they are or aren't important. I am not suggesting inventories will be up or down. I am stating that if they are up then the picture won't be as rosy as you might want to make out from earnings growth. If inventories are down then the earnings picture is brighter than implied. Period. FD is making the point that it is seductively easy to use inventory as a financial engineering tool. You identified that this is dangerous. Both of you seem to be correct IMHO! I have also pointed out that there are indicators that CSCO has been trying to manage inventories down - at least their suppliers are feeling the pain. But without insight into the sales and order flow, we can't predict very well what the end number will be. As to making their earnings? As I posted before, I would be stunned if they didn't meet. I have come to expect a lot from the management team. John.

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