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

To: Tulvio Durand who wrote (48079)	2/5/2001 10:44:32 PM
From: FESHBACH_DISCIPLE	Read Replies (1) \| Respond to of 77400

Tulvio you have it backwards.If inventory down, earnings GO down, if inventories up, earnings up. Thats how the magic formula works.

To: Tulvio Durand who wrote (48079)	2/6/2001 12:44:32 AM
From: Stock Farmer	Read Replies (2) \| Respond to of 77400

Tulvio - careful. You stated I am "suggesting that Cisco's inventories will show a drop ... in what [I] perceive as the only way Cisco will meet earnings projections". Please don't put words in my mouth. I have made no suggestions about what tomorrows inventory numbers will bring, nor how I perceive CSCO can meet earnings projections. I have pointed out to you that it is possible to have inventories grow or shrink decoupled from earnings growth or shrink. I (more correctly, FD) have identified that inventory growth provides a stealth boost to earnings (and vice versa) despite what Gary might say to the contrary. I am suggesting you want to watch what happens with inventories, with earnings, with option tax benefit and a host of other well or less well known things that go into the sound-bite earnings report. And at the risk of flattening my forehead against a wall of denial I am also exploring the reasons why they are or aren't important. I am not suggesting inventories will be up or down. I am stating that if they are up then the picture won't be as rosy as you might want to make out from earnings growth. If inventories are down then the earnings picture is brighter than implied. Period. FD is making the point that it is seductively easy to use inventory as a financial engineering tool. You identified that this is dangerous. Both of you seem to be correct IMHO! I have also pointed out that there are indicators that CSCO has been trying to manage inventories down - at least their suppliers are feeling the pain. But without insight into the sales and order flow, we can't predict very well what the end number will be. As to making their earnings? As I posted before, I would be stunned if they didn't meet. I have come to expect a lot from the management team. John.

To: Tulvio Durand who wrote (48079)	2/6/2001 7:28:34 AM
From: RetiredNow	Read Replies (1) \| Respond to of 77400

Hi all, I just want to clarify how increasing AR allowances or increasing INventory allowances can help a company save up their nuts for a wintery day. I'll need some help from the accounting gods on this thread, because it has been many years since I was a practicing CPA. In prior quarters, a company will increase their AR allowances and inventory reserves, which are credits. Then they will debit bad debt expense and inventory obsolescence, etc., which lowers net income in the quarter in which they do it. Then when a bad quarter comes around, they say they are reversing their allowances and reserves to bring the numbers in line with figures that more accurately represent the true state of affairs. This means they credit those same expense accounts, which actually increases net income and EPS. Accounting gods, pls verify my assertions here. So if Cisco is playing these kinds of games, then we should see a % INCREASE in inventory and AR in excess of the %age increase in revenues. We should also see DSO rise. That would be the red flag that they are eating some of their saved nuts this quarter to bail them out of a bad situation. Everyone should watch for this to get a clue as to what really is going on. I am pretty sure this is how it works, but if I am wrong pls post a response, so that we can all get it right before the conference call. That way we can all evaluate what they are doing. Thx!