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

To: The Phoenix who wrote (48124)	2/6/2001 1:02:35 PM
From: telecomguy	Read Replies (2) \| Respond to of 77400

Hi Gary...what do you make of the NT/JDSU deal for the Swiss optical mfg plant for 3 billion? Was CSCO in the bidding? Does CSCO plan to be in the optical component market or are they content to try to chip away in the optical systems market? Seems to me, optical is the technology that all networking will converge towards......and for CSCO to not gain quicker traction does not bode well. Not trying to trash CSCO -- but seems strange that CSCO is unusually UN-aggressive when it comes to the optical market.

To: The Phoenix who wrote (48124)	2/6/2001 3:48:49 PM
From: Stock Farmer	Respond to of 77400

Hi Gary - We may have been over the river and through the woods, but we're not there yet... I wasn't asking about GAAP methods of valuing inventory. I was asking about GAAP definition of COGS. Which, as I understand it, is affected by the difference between inventory valuations at the beginning and ending of the reporting period. Dollar for dollar. COGS directly affects Earnings, also dollar for dollar. By relentless logic, changes in inventory have a dollar for dollar impact on earnings. Period. Which makes inventory a useful tool for financial engineers. Especially considering that several accountants, a disciple, an MBA, numerous onlookers and a partridge in a pear tree spent days debating whether or not it could be so (does the debate still rage?). So, in theory it might be possible to manipulate earnings. But can it be so? Can it be done legally? Sure. Easy. Try "get out your checkbook and purchase raw materials". Presto. As soon as the check clears you are the proud owner of more real, auditable inventory. Too bad, so sad, every penny you spent is added to earnings by a curious twist of accounting. Of course, it gets subtracted off the cash flow under adjustments to operating income... so you didn't invent any real value... A different method, still entirely within the bounds of propriety is the "gee, what is this unfinished stuff worth anyways" method that Monty correctly identified. There is a certain truth to the old joke "you can tell a great accountant from a mediocre one because they can come up with the numbers you want" <vbg> Whether inventory value is pulled out of the air or calculated by thousands of pencil-pushing CPAs (brilliant or mediocre) is irrelevant. The difference in inventory value has a dollar-for-dollar impact on earnings because it flows through COGS. If an inventory change is done for a good and noble reason like shortening customer's order time, or for nefarious reasons like tricking you into thinking earnings are great... irrelevant. Both will have the same effect on earnings. It is nearly impossible to discern the difference however. Honest management will tell you they are trying to benefit the customer and nefarious managers will use anything you might want to believe. Nevertheless, all intents aside, inventory change affects COGS which affects earnings. Does this make sense yet? John.