Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Zoltan! who wrote (33228)	3/31/2000 12:12:00 PM
From: Kashish King	Read Replies (2) \| Respond to of 77400

Well, when you own the stock, especially for an online rag with no oversight, you are going to pump it and that's just what he's doing. Conveniently, this questionable trader is offering an anecdote about having a PE limit of 30 for CSCO since it's a massive company already. That would be high by any standard so picking that number seems reasonable. Except that the PE is closer to 201, not 31. Let's summarize his remarks: I don't know why the hell this stock rocketed up but I'm not going to argue with the results. Look, companies of this size should be lucky to have a PE over 18 and I would put CSCO in the lucky category. There PE should be around 30 because of many stellar factors. If the stock drops below that, I will buy. Meanwhile hold on for the ride down. Alternatively you can listen to armchair pumpsters like Cramer offer his hindsight. I guess people are of the opinion that if he's babbling on an e-magazine it must be valuable information: not.

To: Zoltan! who wrote (33228)	3/31/2000 4:03:00 PM
From: lawdog	Read Replies (3) \| Respond to of 77400

Why CSCO is overvalued. CSCO is a great company and I have owned CSCO since the 1997 COMS/ASND "crash" when I backed the truck up to load up. But, Rod et. al. are making a legitimate point. P/E ratios are extremely meaningful, in certain cases. How do I know? I do some work on the legal and accounting ends of M&A (J.D. / CPA). I've seen more than a few cash offers in my time and guess what they base them on? P/E and P/S for the most part. When we are asked by a client to estimate the price they will receive if they sell, guess what. It's P/E and P/S ratios. Why? Because it provides a pretty good benchmark for comparisons. To take the other side, there is no other networking giant. So who is to say that a P/E of 200 isn't perfectly logical for CSCO. P/E's are only used because we need a benchmark. We look to previous purchases and glean an approximate P/E that was paid. P/E just makes the most sense. It covers what the client is after (P) and what the buyer is after (E). Without a comparable company, ratios exist in a vacuum, unless you count historical averages as an accurate comparison. On the flip side, cash is king and it can be used to value a business just like P/E's. Buffet likes this approach, as do I. Here's an analysis. Comments are welcome. CSCO has a market cap of approx. $531 billion. As a hypothetical buyer of the entire company, I want to know how long it will take to get my $531 billion investment returned to me. CSCO had $827 million in cash at the close of 1999. CSCO's historic growth in cash (1996 to 1999) was 31% per year. During that same time, earnings grew at about 49% per year. Assuming that each dollar of sales will continue to produce the same percentage increase in cash position (not likely but we'll give it CSCO), it will take 29 years for CSCO to have generated enough cash so that I would have been no better off than had I simply placed my $531 billion in govt. bonds. This is a big problem. To achieve this, CSCO needs to achieve over $30 trillion of sales by 2029. Military spending by every country in the world was $864 billion in 1997. By 2029, at historic growth rates, this number will be $3 trillion. CSCO will need sales that are 10 times the amount of global military spending. Another comparison. In 1997 the entire world's GDP was $38 trillion. At the historic 4% growth rate, world GDP will be $133 trillion by 2029. CSCO will have to account for 22% of world GDP by 2029 for the numbers to work. What does this indicate for CSCO's price tomorrow or next month or year? Your guess is as good as mine. But all I can say is, I'm not stickin' with this baby for the "long-term".

To: Zoltan! who wrote (33228)	3/31/2000 7:14:00 PM
From: Paul Reuben	Respond to of 77400

moneycentral.msn.com Today let's take a look at a related, and I think even more important, question: Has the nature of the current market made the stocks of some -- maybe even all -- gorillas less attractive long-term investments? As long as an investor just looks at the usual factors that define competition -- and determines which companies will dominate an industry and which will become also-rans -- I think gorillas like Cisco Systems and Intel are as valuable to the long-term investor as any gorilla has ever been.Examine technology, manufacturing, marketing, leadership -- any of the factors that Geoffrey Moore, Paul Johnson and Tom Kippola examine in their book "The Gorilla Game" -- and I think an investor would reasonably decide that these extravagantly valued stocks are actually undervalued in the long run. .......And established gorillas can use these same new financial rules of competition to make sure that no company can mount a credible challenge. Cisco is probably the master of this among current companies.