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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Techplayer who wrote (27503)	8/11/1999 8:56:00 AM
From: Mr.Fun	Read Replies (4) \| Respond to of 77400

Addressing Brian's points and some further observations: 1. For me, the most bullish thing about the Cisco's quarter was the decrease in accounts receivable and the increase in inventory. Cisco plays a little game: it stops shipping product in the last x days of the quarter, once it has the number in hand. I was concerned that this quarter would draw down on this "stealth" reserve - instead, they added to it. This means the likelihood of a real problem in January is lower, as they have a bigger cushion. 2. INS was not a bad deal for LU, but it would have been for Cisco. Cisco and Lucent are very different companies. Lucent's enterprise data equipment revenues are small, but it's NetCare professional services revenues are strong and growing 40% a year. For Lucent, professional services is a market, in and of itself, not a means to sell more boxes. Adding INS makes it, arguably, the pre-eminent networking services company. There is a good reason why INS revenues have been increasing at an 80% pace - corporations can not find or afford full time technical talent. Outsourcing will accelerate as the complexity of the task continues to outpace the capability of in-house resources. Add in INS strong position with new carriers, many of whom have the same talent issues as corporations, and you have a huge opportunity. Cisco, on the other hand, can't afford to piss off Anderson, EDS, et. al, as a huge proportion of its revenue is involved in customer situations where these players are a factor. Add in that INS 47% gross margins and 17% operating margins look fine to LU, but scary to Cisco. 3. Geotel did $18m in revenues for March. Given Cisco's July quarter probably included 4 months of Geotel, I'd assume $30m or more, given seasonality and growth in Geotel's business. BTW at $2billion, you'd have to say GeoTel was much more expensive than INS, but both were good acquisitions. 4. Cisco's carrier revenues are now more than $2.5 billion (annualized), but a decent percentage of that is MultiService Access routers sold through to enterprises (this product category is growing like a weed). Total spending by carriers world-wide is more than $200b. LU's carrier revenues are more than $25b. IMHO Brian is right to question the immediacy of Cisco as a threat to LU or NT's carrier business. Cisco does not compete in Wireless. It does not compete in Optical. It does not compete in network software. It does not compete in terminating central office telephone switches (class 5). 5. Contrary to common perceptions, I am not anti-Cisco. As I said yesterday, we will go overweight on CSCO today and hope to ride the upward revisions. I still think it is overvalued at this multiple, particularly vs. LU and NT. 63x CY2000 EPS is alot to pay for 26% expected EPS growth when LU and its expected 27% EPS growth is selling for 39x. CSCO is worth a premium to LU, but not 55%. 6. BTW, the Cash hoard is one of the things I like least about CSCO. It is taking the wrong page out of the MSFT handbook. If you are just going to invest $7 billion in T-Bills, give it back to shareholders. Buy back stock or use it to invest in the business, don't sit on it. Cisco doesn't need that much cash to do acquisitions, since almost all of them are done with stock. 7. A final opinion. I listen to dozens of earnings calls each quarter, and Cisco does more competitor bashing than any other tech company by a large factor. Personally, I think it is unbecoming for a company as successful as CSCO to continually throw in digs at LU, JNPR, NT and others, particularly when they grossly mischaracterise the reality of the situation. To spend 10 minutes predicting LU's demise as the result of their acquisition of INS, when a simple "it wouldn't have fit with our strategy" would have sufficed, is a bit much. I hope Chambers and Listwin temper their shameless sniping in the future and that it does not goad McGinn, Roth, Kriens, and others into turning their calls into a litany of Cisco bashing.

To: Techplayer who wrote (27503)	8/11/1999 9:52:00 AM
From: Mehitabel	Read Replies (2) \| Respond to of 77400

Geotel growth was over 100% when it was bought out by CSCO. Earnings growth was over 80%. AT LEAST. I doubt very much geotel had anything to do with CSCO earnings growth being below sales growth, as the same was true in the April quarter. My own personal opinion about why earnings growth is below sales growth is the adding of new employees. CSCO added 1100 new employees in the April quarter, was planning to add 600-900 for the just-reported quarter. New employees add to costs without adding much right away to earnings. Then, there is also the possibility of R & D expenses, and the potential costs of an aggressive push into the SP market (which seems to have been successful). AND also possible, the "cookie jar" accounting method accounting for part of it.

To: Techplayer who wrote (27503)	8/11/1999 5:17:00 PM
From: Eric	Read Replies (2) \| Respond to of 77400

briand Sorry that I didn't get back to you sooner. I don't like LU's vertical model as has been mentioned earlier. I think the jury is still out on LU executing with their new business model. Don't get me wrong I think they have a lot of potential going forward it's just that I want to see how they will swallow the recent "big fishes". To convince me otherwise will take at least a year from now. Anyway you look at them Cisco and LU will do great. It's just that the majority of my money is on Cisco! <VBG>! Eric