Rick,
I forgot who it was, but right about the time of SCMR's IPO, CSCO bought a company for $7 billion that had $10 million in revenues, just for optic technology that the market now is heavily discounting. They overpaid and it would have been better for shareholders, IMHO, if CSCO could have developed it in house, but they were likely forced into that purchase because they were caught behind, not good either. That fact that CSCO paid that much legitimized the crazy valuations these optic companies got. Now if the only way CSCO compete is to buy technology, what happens when that corporate currency starts deflating, like now? Whether or not an acquisition is worth it depends on the price paid and technology acquired. With CSCO buying all its technology what happens when companies refuse to get bought out by CSCO?
I think CSCO will be lucky to earn $0.60 this year, after last year's $0.53, around 13% growth. With CSCO at $30 and earning $0.60 cents that's a forward P/E of 50 for a 13% grower? Even the "magic" that is CSCO cannot sustain such a high valuation, IMHO. |
