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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (34895)	11/15/2000 11:55:58 PM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

Mucho Maas, Sorry to learn you're a bit under the weather. I mention it here because people have posted a couple things about the accelerating revenue growth rate trend. My point would be that if you just look at those numbers without looking at anything else, you are not getting a very clear picture of the story. There's no question that you're right. Well, at least there's no question in my mind. :) On the other hand, it's impossible to look at any single aspect of a company to arrive at a clear picture of anything. I would venture to say that if a clear picture of Cisco was needed for a viable investment, Cisco wouldn't have been able to go public by virtue of the fact that most investors don't understand their product. Even fewer understand their product mix now than when they went public. So what do investors do who join me in finding no shame acknowledging that I'm investing in a company that I don't totally understand? Some of us go to the stuff that we do understand -- Gorilla Gaming which puts a special emphasis on product adoption, revenue. Gaming also puts a special emphasis on a lot of the metrics of a company that are not quantifiable. Understanding that last point means appreciating that anyone could publish a laundry list of metrics by which we might evaluate a company. Yet no list would be complete. And 99% of the investors would only understand part of any list. So in the end, we try not to become adversarial. We try not to lay claim to understanding the pros and cons of a company more than the next person because in the end, it doesn't matter what the next person understands; there's no need for any of us to "convince" any of us. The only thing that really matters is that each of us takes full responsibility for our investment success or lack of it. Glad to have you joining us pointing out the things I don't understand about Cisco. But frankly, the company is so complex and beyond my comprehension that I'm especially satisfied that for the last three years it's never become more than 5% of my portfolio. My knowledge is limited. The same is true for my risk. Make sense? --Mike Buckley

To: Wyätt Gwyön who wrote (34895)	11/16/2000 3:47:26 AM
From: Bruce Brown	Read Replies (2) \| Respond to of 54805

Mucho, I enjoy reading your thoughts on Cisco. In fact, the company warrants discussion as the law of large numbers increase. Concerns, for myself and others, are centered around the question of Cisco being able to or not being able to keep their 'premium CAP' based solely on the growth rate. In addition to your concerns about what you see by way of dilution, accounting, 'other income', cash flow, operating cycle, etc... - the competitive environment warrants concern. Perhaps I'm a renegade on this board in those thoughts even though I'm invested in Cisco. In the past two years, we have seen the advent of an entire host of companies addressing very specific target niche markets that Cisco also competes in which has been targeted with the name of Next Generation Networks. I like to call the target niche markets 'broken' pipes that need 'fixing'. These target niches are specific and within each niche there has been and will continue to be 'generations' of equipment/technology introduced. As an example in optical, there are an entire host of optical start-ups that will be coming public in the next 12 - 18 months that are 'second' generation within the niche. The 'first' generation equipment is what we see in the market place now. Likewise, within niche areas of core, edge, etc.... we have companies (both old and new) that will continue to move through their 'generations' of products that address specific 'fixes'. With much of that in light, the continued 'pressure' on Cisco in terms of margins due to the competitive environment for some of their target markets will certainly not be slowing down as we move deeper into this 'next generation(s)' equipment/technology. As we move forward, consolidation will take place in various arms of the industry. My money management answer way of playing these issues was to 'enhance' my investment in Cisco by also playing 'baskets' of companies that target specific, important niche 'broken pipe' problems. It's a very large space in terms of players as well as the potential revenue stream. Therefore, the 'basket' is broad and focused on the top tier players in specific niches. As with any 'basket' strategy, that takes time to study, research and follow. Yet Cisco is firmly planted in the TALC for IP/Broadband. The reality is that the competitive environment will pressure all aspects of the business. I'm being careful not to focus on inventory, cash flow, DSO's and specific benchmarks for one important reason: WAR! Whether we take each niche thoroughly apart and examine it to see if we have a specific gorilla game or a specific royalty game going on (I believe we have both - depending on which niche) - it's all about grabbing customers and getting market share at the moment. When that part of the TALC takes place, an investor has to be a little more 'forgiving' for specific fundamental metrics. I call it the "if you snooze, you lose" period. A company not sleeping is not going to always look so refreshed in the heat of battle. As a Cisco shareholder, I'm willing to accept this period knowing what the future results could be. However, I have hedged my investment using the 'basket' strategy of those that are causing the sleepless period. BB