Gotta acknowledge class. Bravo.
A thick skin and a sense of humor helps ;)
Been a while since we've seen 200+ posts in a day this thread. Looks like I picked the wrong few days to be incommunicado.
As to the results? Nice face to the financials. Shame about the future prospects. Market seems to agree.
The issue isn't the face, it's the degree to which the benefits represent (or don't represent) sustainable trends.
On the whole deferred revenue cookie jar thing. Cookies taste great and are in the jar to be eaten. But when more are being eaten than baked, that's unsustainable. A fact which GVTucker actually does seems to understand <g>
On the whole inventory thing. Nifty trick (er, co-incidence) that the inventory benefit to GAAP offsets the writeoffs and chargebacks to Pro-Forma. GAAP = Pro-Forma so whichever truth you go by gives the same nice $0.09 answer, right? And nothing up the sleeves either ;) Sustainable? No.
Balance sheet positive. More cash than generated by the business. Smells like stock option contribution still contributing. Sustainable? Um... depends on the stock price trend <ng>
Did anybody else notice no amortization of goodwill? "--" versus a "usual" 150 million/quarter. Second quarter in a row. Perfectly "legal" accounting. What it means however is that management represents that they paid a fair (excess) premium price for the assets bought. Or in other words that while everyone else on the planet was paying inflated bubble prices, Cisco was paying a fair price? In management's opinion. Perfectly legal accounting. If perhaps somewhat aggressive. Sustainable? Um... if you want...
Stock buyback 250 mil $... someone thinks this is positive. Ok, so management goes and spends YOUR money to buy back some of THEIR stock options, in the process of pocketing even more of YOUR money by issuing way more shares than were bought back (to themselves, and others). While THEY sold their own holdings. And this is somehow good news? Sustainable? Apparently. At least until YOU put a stop to it.
Interesting to note that the 21 billion pile in the corner would be enough to buy back the billion or so shares that were issued in the last few years. Anybody care to hazard a guess how much money Cisco took in by selling those shares in the first place?
And speaking of the Banco National d' Cisco, how's that doing? 179 Mil on a pile that's 21 Bil deep. About 3.5% annually, if anyone's counting. Considering that the measely but highly liquid T-Bill is the baseline for pathetic when it comes to investment returns, hopefully whoever's in charge at the bank isn't getting much of a bonus this year.
So... summary of Cisco's business (Internet Gear Stuff)
922 GAAP Pre-tax income
(179) Contribution from the pathetic banking segment
(195) Contribution from Inventory-R-Us liquidation sale
(150) Contribution from the goodwill fairy
------
298 Pre-tax income
Or about $0.04 / share (after tax) from the Selling Internet Gear segment.
Which is a bit worse than folks expected. Selloff.
Not even counting contributions from the cookie jar.
And finally, no point taking it on the chin about gross margin without a polite rejoinder. Those who pay attention would note that in days gone by, they took 100% margin revenue from the top line and salted it away (into the cookie jar), thus artificially depressing gross margins "down to" 64%. On the way back out of the cookie jar, this extra goose to revenues lifts gross margins. To about 57% (comparing apples to apples). So this quarter's 57% isn't as good as the 57% that was 7% less than the 64% they used to enjoy.
And net margins, net of special effects that is, well they're down by even more.
So, which ever way I look at it, margins are still comparatively gross. For whatever {set of} reasons ;o)
Nope, this is not your father's oldsmobile. If we ever go back to valuation models of '95, we'll be looking up at $20 as a target price for quite a while. We'll be looking up at that line between single and double digits, actually.
Why? Well, what would I pay for a guarantee of $0.05 quarterly growing at the currently projected 4% per quarter (17% annually) into the future? After ten years I'd end up with $5.00 After 17 years of no inflation I'd end up with $17.46 ~ both assuming 0.0% inflation, 0.0% dilution and 0.0% return on investment.
None of which appear to be "good" assumptions.
So what are all those 7.3 billion outstanding shares really worth?
A question about which it appears a few folks are beginning to think. |
