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To: Mr.Fun who wrote (12068)	1/5/2000 6:50:00 PM
From: Zoltan!	Respond to of 21876

Clerk, you crack me up. Then again, I'm used to dealing with smart people. Maybe you should read the rest of today's WSJ article.

To: Mr.Fun who wrote (12068)	1/5/2000 7:41:00 PM
From: Chuzzlewit	Read Replies (3) \| Respond to of 21876

Mr. Fun, I think my pencil is a bit sharper than yours <g>. My discount rate for stocks of this ilk is 21.5% (6.5% risk-free rate + 15% risk premium). And perpetuity is a pretty long time. I prefer to use 10-15 years as a time-frame for growth into a mature company, at which point I apply a stub valuation of around 12 - 15x cash flow plus excess cash on hand. The last time I did this analysis I came up with around $30 - $35 for CSCO. There are really two issues here: first, given the current business model, how long can we expect hypergrowth. Hypergrowth depends on two subordinate questions: 1: how large can the segment grow as a whole, and 2: to what extent can any company out-compete its rivals (i.e. take market share). Second, once the sector is mature, what is the expected upgrade cycle. What is ignored in this approach is the emergence of new technologies, but since they are new we cannot quantify them. It would be nice if we could somehow provide an objective weighting for this unknown based on R&D spending unrelated to current products. I have no problem holding stocks that are somewhat "overvalued", but by my reckoning CSCO is well beyond that point. Don't get me wrong: I think that CSCO is a superb company. A final issue that seems to be overlooked is the issue of interest rates and inflation. One of the drivers for the current stock market environment has been very low interest rates. But interest rates have been rising, and I have every expectation that they will continue to rise, because if they do not we are sure to see inflation reasserting itself (if, for no other reason, increased competiton for raw materials due to the resurgence of the Asian economies). I wonder if Zoltan ever took the time to study the nifty fifty. Has Zoltan pondered the fate of can't miss stocks like Polaroid or Xerox? TTFN, CTC