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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 83.64

+0.6%

9:59 AM EST

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To: GVTucker who wrote (67896)	5/17/2005 4:54:22 PM
From: RetiredNow	Read Replies (1) of 77400

I agree that it shouldn't, but I guarantee you that if Cisco can pull off this new security thing and the market thinks the new security will result in lower options expenses, then this stock will add a couple dollars in price within the week following a positive nod from the SEC. The reason why is the market has already priced in the future hit of expensing stock options, based on the Black Scholes model reported in Cisco's footnotes. Reduce that figure and everyone's EPS estimates go up. Higher EPS with the same PE forecasts increases stock price forecasts by the analysts, which will put upward pressure on the stock price. Nothing fundamental to the company will have changed, but the market valuation will change as the uncertainty is erased in a nice upside surprise sort of way. JMHO. The rest of us who value companies based on free cash flows will all be scratching our heads at those animal spirits in the market.

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