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To: Tony Viola who wrote (22078)	5/4/2000 8:29:00 PM
From: sea_biscuit	Respond to of 25814

It looks like he mentioned the number in some interview, maybe on TV. Actually, even tripling sales in 10 years looks quite impressive (LSI investors would be very happy if LSI were to achieve it, for instance), but when we have nosebleed valuations like CSCO has today, we will have to cling to expectations of 30%, 40% or more year over year, in order to justify holding the stock. The reality is that the larger a company gets, the less likely it will be to achieve those rates, especially year after year after year. And all this assumes that the next 10 years will be a bull-market as great as the previous 10 years... and that, in and of itself, is a huge assumption.

To: Tony Viola who wrote (22078)	5/4/2000 10:27:00 PM
From: sea_biscuit	Read Replies (5) \| Respond to of 25814

Tony, here's some simple math. Let's say that the average American family earns $40000 ten years from now, and let's say that there are about 80 million such families (right now, the numbers are approximately $32000 and 70 million). That works out to $3200 billion of income. Now, taking CSCO's revenue growth rate to be 30% over the next ten years, its revenues will be close to $200 billion. That will be 6.25% of the total national income! And that is before we factor in taxes! If we do account for taxes, then we are likely to get closer to 9%. This means two things -- 1. The average American family would be spending 9% of its income on routers and related products, and 2. They have no choice but to buy it all from CSCO. Now #2 might well become true (and the DOJ might be breathing down CSCO's neck 10 years from now!). But #1 is an incredible number. It just can't happen. You might say that this analysis considers only the US and not the rest of the world. But, at least over the next 10 years, the US will have the lion's share of the market, not just for routers but for almost every conceivable product. I would like to see some rebuttals to the above. If I have made any major goofs anywhere or overlooked something, I would like to know the details.

To: Tony Viola who wrote (22078)	5/6/2000 9:39:00 AM
From: John F. Dowd	Read Replies (1) \| Respond to of 25814

Dear Tony: You guys neglect the power of compounding. To triple your sales in 10 years all it takes is 13% compounded growth per year for ten years. I am surprised at all you scientific numbers men being so naive about compounding. A 30% per year increase would result in a multiple of 10.6 for 10 years. How can you guys claim to be investors with such a poor grasp of future values of cash flows? The formula is Multiple =(1+r)^( n-1) where the rate is r as a decimal and the n is the number of years. JFD