Hey, this is good progress. OK, Jach, now answer me this:
What defines a market segment? Why are GM and Ford different than Sun, HP, and Compaq? Isn't Compaq a different market segment than Cisco? I doubt Cisco thinks of Compaq as a major competitor. Financially, you are arguing that a dollar of earnings is a dollar of earnings, a dollar of revenue is a dollar of revenue. Why are people paying more, per dollar, for Sun's earnings than GM's? Now apply that same logic to Cisco and you may start to get your answer.
Also, like any good theory on valuation, you should use backtesting to get some sense of whether you are on the right track. So, Jach, answer me this:
Cisco's market cap has been greater than Sun + HP + Compaq for a while. Cisco's stock returns have obviously been good since then. Doesn't that make you wonder if this is a relevent metric? Track Cisco's valuation over the past 5 years compared to Sun + HP + Compaq. Let us know what you find. That would be useful information for the board.
To each their own, Jach. Different investment styles can work, even if they disagree over certain stocks. It's just important to understand the logic of the other sides. |
