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

To: The Phoenix who wrote (44693)	12/17/2000 7:00:02 PM
From: Stock Farmer	Respond to of 77400

Hi Gary - if those are just idle thoughts, you should spend more time in idle! <intended as a compliment, btw>. Absolutely true, must look past consolidated earnings, for the same reasons it's important to look beyond the pro-forma earnings. Too many people miss this point. Your "watch where the cash goes" is key. Good to treat R&D and Marketing (not sales) expense as an investment when you really pick apart a company. Your $1000 company is a perfect example. Theory says company expects a return from marketing and a return from R&D that exceeds their weighted cost of capital. Note however that the in-process R&D and the Goodwill they are writing off are "real" charges. When a company issues stock and scoops up the assets of another company, there is a price to pay somewhere that represents the difference between what it is "worth" and what it "cost". This is "Goodwill". In Process R&D is a kind of high-tech goodwill, a lot of controversy surrounds getting it right. But you can't have it both ways (ignore purchase costs of investment while counting R&D & Marketing as investment). Accellerating revenue noted as a point in favor. Investment gains or losses don't factor large in valuation. Firstly, because majority of change occurs in the "unrealized" column. Like your "unrealized" gains in CSCO stock you hold long. Could be worth something if you sold today, but could be worth more or less tomorrow. Big "unrealized loss" this last Q, and possibly a bigger one this Q. Secondly, and more important, if going to count financing activity, important to use value comparators like banks, or blend like a holding company. Where's the money going? Great question. The question, which strikes to the heart of placing an economic value to a company. Goes to the theory of discounted free cash flows. John.