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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 70.96

-1.6%

12:07 PM EST

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To: Wyätt Gwyön who wrote (51971)	4/21/2001 2:54:00 PM
From: Stock Farmer	Read Replies (2) of 77397

Mucho - I'm going to step in here on the side of Cisco. First, this 2.5 B$ is certainly a huge cookie jar, and there are a lot of hands could dip in. So better to under commit and over deliver. Second, I would rather that the inventory gets used to boost margins rather than to boost the heavy metal content of yet another tract of the planet. So if the opportunity does arise, why wouldn't the company use it? Better that than spending more shareholder dollars to buy different identical components, don't you think? Third, the management has an obligation to tell the truth, and so far what they said does add up. Perhaps at ye 2000 they initiated forward supply contracts assuming 50% sequential revenue growth and tight supply. But then overlay actual revenues. Back extrapolate COGS, work ratios... not unreasonable that they end up with trainloads of components piling up on the floors. I worked the math, and you can make it come out. Blame management for excessive confidence... but not dishonesty. My only criteria is this. If the company uses the components, it will be disingenuous if such use is not given as much visibility as the boost to gross margins it would represent. If it shows up as an obscure footnote in the 10K... well, you will have a strong case. But if it shows up as a "charge" against pro-forma results well, then you will see for yourself an honest management team. John.

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