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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 77.80

-1.9%

Dec 12 9:30 AM EST

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To: RetiredNow who wrote (63026)	2/8/2003 2:12:00 PM
From: Stock Farmer	Read Replies (1) of 77400

Here's a prediction for you. If the powers that be decide that all companies need to expense stock options, which I give a 50% chance of occurring, then I think the probability is extraordinarily high that you'll see Cisco either stop issuing options or cut it back dramatically (90% probability). And if that occurs, I would bet we'd see a very quick rise in the stock to the $20 per share level. I created a decision tree based on these probabilities to calculate an expected value and that came out to $19.20 per share. Good luck. I believe a few things will happen. I think that employees will want fewer stock options but higher cash wages. What will happen is that reported costs will increase and converge on actual costs, which will be decreased. In other words, Cisco will become more productive per dollar spent! Although it will appear less productive on an as-reported basis. In other words, Cisco will be a better investment at any given price than it is now at that same price. Doesn't mean the price should go up (better could just be less bad but still bad), just that it won't be as far off the mark as it is now. Depending on the degree to which the market factors in as-reported profitability versus as-delivered profitability we could see prices go up or down. As far as Cisco being a good buy at this level? Only if you are speculating, not if you are buying wealth creation [my opinion]. John

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