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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 76.93

+1.2%

Nov 28 12:59 PM EST

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To: slob who wrote (11278)	1/2/1998 12:02:00 AM
From: LWolf	Read Replies (1) of 77400

>>Why can CSCO generate such high gross margins?..why CSCO seems to be able to generate over 70% gross margins while all the competition sit at around 30 to 40%. Is it simply a matter of CSCO charging twice as much as its competitors and getting away with it? Or are design and manufacturing efficiencies responsible for the differences?<< One of the points that John Chambers made in his keynote address at the Comdex conference was how Cisco had used the internet to reduce operational and administrative costs. That they used the internet for sales, customer service, training, etc. etc., that when they decided to make the investment in the internet they were leveraging their investment 10fold (or something like that) in reducing operational and administrative costs. He showed a chart that diagrammed a 'pull-away' difference of Cisco from their competitors in costs and profitability. And he basically said that any company that wanted to be successful would have to do the same thing. We're living in a new world (a similar sentiment that Gerstner made to Wallstreet)and companies will have to use the internet to survive. IMO a company's margins are not built on product price alone, but on all the other costs that it takes to manufacture, service, and administer the company....plus very savvy management. To watch Chamber's keynote @ Comdex: you need to have downloaded RealPlayer Plus 5.0 (it's free)http://www.real.com Go to the Cisco site, cisco.com Double click, and RealPlayer automatically launches the video webcast Enjoy a GREAT presentation. Hope this helps a little. L. Wolf

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