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

To: GVTucker who wrote (45833)	1/3/2001 11:18:35 AM
From: Stock Farmer	Read Replies (2) \| Respond to of 77400

GV - Despite the fact that Phoenix is talking in turd, I think that he is trying to make a valid point. His statement that earnings directed as investments in startups don't reach the bottom line is hogwash. As you pointed out. But if I understand what he's trying to say, there is an economic cost to growth that is detractive to earnings as reported under GAAP. It doesn't happen as he says when they fund a startup. It happens when they purchase a company. I think he's talking about the writedowns of in-process R&D, ammortization of goodwill and so on. Classic free cash flow analysis stuff but garbled in the translation. I reviewed 2000 10K and see that adjusting GAAP earnings for depreciation, ammortization & writedown of purchased in-process R&D, partially offset by adjustments for interest and income from minority investments, we shift "reported" earnings by plus 20%. Not exactly the stuff I would use to justify a factor 2 premium in the stock price, but each to his own. John.

To: GVTucker who wrote (45833)	1/3/2001 11:33:57 AM
From: kvkkc1	Respond to of 77400

GV, Do you like to play games or what? If the earnings are reduced by charges for non-recurring charges, then the earnings don't make it to the bottom line. If they are included and reported excluding non-recurring charges then they make it to the bottom line. I personally like them included before exclusions for non-recurring purchases, since that gives the true picture of what the earnings are.knc

To: GVTucker who wrote (45833)	1/3/2001 11:44:06 AM
From: The Phoenix	Respond to of 77400

GV, Actually I believe much of these investments/technology "farming" activities are accounted for and written down as R&D. I think if you look at the 10Q, pg 15/16 you'll gleen this. This I believe is part of the reason that R&D spending accelerated at a faster rate than earnings last year... again, they're back in line but I think CSCO has taken a pretty conservative approach here.... which BTW means that gains from these investments will continue to occur unless these companies go belly-up. OG