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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 73.99

+0.2%

3:59 PM EST

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To: RetiredNow who wrote (62763)	1/24/2003 2:56:22 PM
From: Stock Farmer	Read Replies (1) of 77400

Aaah... enterprise value is determined from what wealth we expect to be created over it's future years Yes. Entirely the point. Wealth created, net of wealth employed in the business. During the most booming of times, Cisco has been unable to create wealth for shareholders. What makes you think they are going to be able to create wealth during less booming times? The company has 28 Billions in capital (assets, net of liabilities) tied up in one way, shape, manner or form. Over the past year they managed to generate an apparent free cash flow of 1.2 B$ and yet they spent 1.8 B$ to retire dilution. The company is selling stuff for less than they are reporting it costs them, but the proceeds are all getting tied up in the capital necessary to produce these things. There is very very little left over from which to pay shareholders a meaningful dividend. And whatever is left over is being deployed to fight rampant dilution. A proper analysis of the potential long term wealth creation of the enterprise might not bring you to $15 or even $9 per share. Not on the business we are observing. Despite what you think you see. Yes, we need to be looking forwards. Yes, I have pointed out some facts of history. Which showed that the company was a huge loss to shareholders. You may not remember, but all during the time from '96 onwards the company was being viewed as exceptionally profitable. By folks who were looking forward at that time. And yet we have the benefit of hindsight to render conclusive proof that it was indeed not profitable at all. Very unprofitable. Despite all the Free Cash Flows flowing around. So here we are looking forwards yet again. In more difficult times. With with the same tools and the same eyes that looked forward five years ago. Maybe we're smarter this time. Maybe not. John

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