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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 75.19

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3:59 PM EST

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To: Anthony who wrote (19659)	12/2/1998 4:25:00 PM
From: Hagar	Read Replies (3) of 77400

To all, Because its so quiet here and in light of Cisco's latest acquisition, I have an item for discussion. I preface this by saying I am fairly ignorant with respect to the issue. I read some time ago a set of articles (don't have a reference) questioning the reported earnings of companies that take a lot of charges, specific references were Lucent and Cisco. First, stock prices through some function reflect past, present, future earnings of a company. Second, charges taken against earnings through acquisitions for R&D in progress knowingly dilute the earnings. Third, earnings received in the future from that R&D are reported unencumbered by the charges. Has Cisco mastered this? Wall street has come to expect these charges routinely and does not penalize the company for taking them. Do the unencumbered earnings mask the real health of the acquisition? Does consistently doing this allow Cisco to keep the earnings picture smooth and predictable? If this is a "little smoke and mirrors" does the true bill ever come due? I only pose the questions, I have no bias for or against Cisco. I'm just an engineer trying to carve out a piece of the pie.

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