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

To: RetiredNow who wrote (40266)	9/29/2000 9:29:54 PM
From: Stock Farmer	Respond to of 77400

Mindmeld - You have the rates of growth decreasing for both Operating Cash Flows per Share and Net Revenue. Yes. But when you multiply your OCF-per-Share by number of shares and then compare that number to revenue, the ratio is increasing. Just so we don't go round the loop again, an example. Using round numbers & note that 7B Shares x 1.07^5 (5 years at 7% dilution) = 10B shares in 2005 you get: 00: OCF/Share 0.97 x 7B S = 7 B / 19 BRev = 36% 05: OCF/Share 5.18 x 10B S = 52 B / 101 BRev = 51% Or in English: your model has Operating Cash Flow per unit revenue increasing over time, even though you have operating cash flow per share increasing at a lower rate, and revenue (total) increasing at a lower rate. And I'm fully aware that OCF is not the same as free cash flows (although because I am more familiar with free cash flow as a term, I may have unconsciously swapped the C&F or expanded the acronym incorrectly) - apologies for any confusion. My point is that it is unlikely that cash flow from operations is unlikely to increase as a percent of revenue as time goes on. You would be generous assuming it should stay flat. I almost thought to complement you on your revenue forecast as being one of the first to put forwards a view that we won't see 50+% revenue growth forever. Your 100B (or so) 2005 number is not as far fetched as others I've seen (as it's approx 23% of worldwide market projections in 2005). Given the number of players, owning a fifth of a total pot which includes spaces CSCO don't play is generous but not crazy. So I have a hard time suggesting you fiddle with Revenue to get the ratio right... nope, suggest you fiddle with OCF. Which leads inexorably to the $110 price target by 2005. Will ponder other aspects of your post & reply later. John.