mindmeld: you have it wrong.
Five years and one quarter later, the company has retained profits of 5 billions and change. That's a billion a year.
The bulk of the rest of the increase in equity has come equity financing (stock options and other similar share printing and otherwise enriching activities).
Mark to market gains and losses have not come from retained earnings. They have come from "other comprehensive income". Looking at the filings, they garnered about 4B$ of this during the bubble and lost about 3.8B$ in its collapse. Easy come, easy go. Still, net of everything it's been a small gain.
Actual gains and losses actually came from somewhere. Total interest income & realized gains counts for 2,403 of 5,023 M$ total profits (by adding up realized gains and interest income). And it is accretive to retained earnings to the tune of half, so I wouldn't blow it off that quickly if I were you.
Equity financing has contributed 3/4 of Cisco's shareholder equity, not 1/4. Since 1997 the lifetime cumulative amounts are:
1997 Q1'02 Change
M$ M$ M$
Mark-to-market & other Gains 159 278 119
Equity Financing 888 20,372 19,484
Actual Profit 1,777 6,800 5,023
----- ------ ------
Shareholder Equity 2,824 27,450 24,626
You state "the bottom line is that this company is a powerful cash generating franchise, even when we exclude the contributions from stock options and investments.".
That is a pro-forma bottom line.
The GAAP bottom line is that this company is a modest cash generating franchise slightly inferior to a similarly sized pile of T-Bills. It is also a powerful cash transferring franchise, with most of the transfer coming from pockets of shareholders of the company instead of shareholders of its customers. And most of the transferred cash is going to the pockets of the folks with their hands upon the wheel!!!
Because the SEC filings reveal that in actual fact, the company has *generated* less than $1 per share in its lifetime. Net of what it's *actually* spent, and holds an *additional* $3 per share that has come from equity financing. The interest on which accounts for half of that $1 of "generated" profit.
The business model is one half Bank, one half Stuff that Powers the Internet, and eight halves Tupperware party.
Perhaps before you go to the next one at $15 you could wake up and smell the coffee brewing. Or at least read the SEC filings with an intent to understand, rather than explain why it is going to be such a good investment one of these days.
It's a great company. No question. A multi-billion great company. A billion times yes. But billions of great divided by billions of shares gives a single digit greatness per share.
As to differences in our number crunching spreadsheets, we can narrow that gap if you comment directly to the sample I published.
John |
