It appears you are looking at the part of the picture that the Silicon Valley spin-doctors want you to look at: cash flow from operations.
First of all John, the 2 billion was last year sometime. This year is 1.3 billion, 1.6 billion - numbers like that.
Taking cash and cash equivalents from this year, and comparing them to last year, really doesn't tell you much at this point. First of all, for whatever reason they currently have over 20 billion in cash so no incentive to add to the hoard. Therefore, they are spending a bunch of money to buy back stock. I knew when I posted the cash flow issue, that your response would be that cash on hand has not increased. Of course we both know that, because they are spending it on stock, a fairly recent development, not really applicable to too many years prior to this one. The important thing to me is whether or not a company can generate cash from operations, not how they spend it, if they are solvent with no debt issues. (another hot button right there I understand, suffice it to say that it is enough for me to see companies like Dell/Cisco generate cash and put their competition out of business, vs. watching every cent and how they spend it).
Right now, I think its fair to say that Cisco is receiving *none* of that elusive cash from stock option exercise that you believe generated 2/3 of their liquid assets. All the stock options granted over the past 5 or so years will likely expire worthless, which is I'm sure why they issued that new grant. So if they can generate billions in cash flow from operations on a quarterly basis, with no infusion of money from much else, it stands to reason that over time a stockpile of money will emerge.
My business (software) is notorious for spinning the difference between cash flow and earnings, so its not like I am unfamiliar with this issue. Why on earth would anyone look at *earnings* over cash from operations given all this debate about expensing this or that? Your own arguments in favor of options expensing include the fact that earnings are a nebulous concept anyway.
My original point was that taking some contrived numbers like earnings, with revenue recognized over the longest possible timeframe and reserves and all that, are probably not the best way to determine why a company has a certain amt of cash in the bank. If you want to say cash showed up due to some nonoperational anomaly like options exercising, wouldn't you want to look at cash generated over time (when options are worthless like now) and determine total cash over the period you are evaluating? Because if you do that, its fairly obvious Cisco had a lot more than 7 billion to play with.
BTW I am still wondering about that 7 billion earnings number over the 20 year existance of Cisco as a company, given that we had one billion in earnings last quarter and generally around 750mm on a fairly typical basis. I assume you are taking the GAAP numbers and not pro-forma, so trying again to take the worst possible case (even then 7 billion over 20 years seems too low)- but again, taking the lowest possible numbers you can find (I suspect if earnings were high and cash flow were low, you would use the cash flow numbers), adding them up and expecting them to equal liquid assets... is a fairly simplistic way to look at things don't you think? |
