When I read the CISCO article I couldn't help thinking how juvenile the article was.
No attempt at journalism whatsoever.
The first thought that ran through my mind was "This is something that Barrons would write". LOL, I now find out that everybody is criticizing Business Week because most of the information was picked up from a old Barrons article.
I really don't mind bashing CSCO because there is plenty to criticize. Unfortunately, when you have a kind of "road rage" mindset that can do nothing but present one side of a story it is fairly useless to a rational person.
IMHO, it comes down to this:
Question: Does CSCO have cash in the bank and little debt?
Answer: CSCO has $19.1 billion in cash and equivalents, more than double that of competitors Alcatel (ALA ), Lucent Technologies (LU ), and Nortel Networks (NT ) combined. CSCO also boasts a pristine balance sheet with zero debt.
Question: Is sales going to increase going forward?
Answer: That's anybody's guess. Most say yes.
Everything else is gibberish. I can hire a dozen PhD economists & CPAs that will explain in great detail how horrible the CSCO data is. I can hire another dozen PhD economists & CPAs that will explain exactly the opposite.
It's really not worth commenting on the article. It is so biased that it is worse than worthless because it leaves you with only one point of view. The only reason they are publishing the article is because it is cheap to copy someone else's hatchet work and they want to "ride the Enron wave of accounting hysteria" to sell a few more copies. Here are a few obviously baised items:
1) He talks about how enormous amounts of CSCO hardware is on ebay and the like. He could have pointed out that much of it is obsolete. He could have pointed warranty problems. I happen to know somebody at SUN who spends most of their time going around to customers and explaining to them how SUN will not service fire sale equipment because SUN has no idea where it has been. I am sure you have a lot of the same thing going on with CSCO. I am sure it was just a oversight.
2) Barrons, I mean Business Week, goes crazy over "pooling of interest" and how horrible it is. I recall about a year ago hearing a economist explain both sides of that problem. If you don't do "pooling of interest" then you have to account for things another way. Either way you go you can be critized. When I heard it from a impartial and informed person it made sense to me and it was not that big of a deal. If you present only one side of the story it becomes a house on fire.
Business Week should have their hands slapped not just for lowering themselves to the "National Enquirer" mentality but for almost plagiarizing other articles. They start paragraphs with comments like:
But Cisco's core business of supplying Internet infrastructure, while solid, is nowhere near capable of generating the 70% growth rates of yesteryear. After all, the corporations and telecom carriers that lined up for Cisco's gear in the '90s are spending much less to expand networks. [This comment came out of the blue. Who said anything about 70% growth? This comment assumes somebody is expecting 70% growth]. Many of the telecom players are laden with debt and overcapacity.[And many are not but of course we won't mention that.] Some analysts believe the current down cycle for overall corporate capital spending could last years, even when the recession ends.[Some but not most. Most analysts don't agree with that but Business Week didn't feel we need to know that.] Meanwhile, those that do want to spend can pick up some bargains. For example, eBay Inc. lists more than 3,000 Cisco products that are being auctioned for much less than their initial prices.[And you will be paying a lot of money for a buyer beware item with no factory service.]
It is really not worth going on.
Business Week, which wasn't very high on my chart, just lost what little interest I had in them. |
