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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 75.19

-0.1%

Jan 16 3:59 PM EST

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To: Eric who wrote (55942)	10/15/2001 3:19:55 PM
From: Stock Farmer	Read Replies (1) of 77400

Hi Eric - great comment, distinction between growth and value. But the question I come back to is that the only way to really get money out of CSCO (the shares) is by selling them to someone. Or perhaps to collateralize the position. I think folks who purchase Cisco here on in will get most of their original money back. But they may not get a great return, even in the long run. Back in early 90's or so when the internet was in its infancy, Cisco had the brightest of futures to look forward to. By '95 they had managed to earn and retain about a billion dollars with maybe 5% of the planetary internet built out. If they were to continue on at that rate they'd accrete about 20 B$ in present value retained earnings at buildout-complete. And maybe have doubled that with some sort of wave-two technology... Which at the time was justification for their market cap of 30 B$ back then. Five years later they have accreted a total of 8 Billion dollars of retained earnings from internet buildout (I count the other 20 B$ as a gigantic off-balance-sheet shareholder loan). Which corresponds to about 40% internet buildout at '95 rates. So they're pretty much still on the path that made them worth $30 B. Except that along the way, managing the share price became more important than managing the business. Not just for Cisco, but for the whole new economy. And now Cisco sports a 4x market cap. The same value proposition about making money with IP and the internet holds. Cisco still commands roughly the same position now as they did then. Nothing is really new under the sun. And the likelihood of them accreting that 20 B$ is getting stronger and stronger. Just over a longer and longer time. But I don't see the Internet as only 6% built out. Which is what a market cap of 120 B$ and lifetime retained earnings from the internet at 8 B$ really means. So I wouldn't be biased to purchase here, even at $14. I'd want to see what happens when the dust settles. John

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