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

To: elmatador who wrote (51172)	4/6/2001 12:25:57 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 77398

elmatador - I give you more credit than you give yourself. As I see it, CSCO can do two things: it can draw down its reserves of cash and investments and lines of credit, or it can reduce spending. Or a combination of both. Looking at cash flow from 2Q, seems to me if they hadn't built inventory by 1.6 B$ and hadn't spent 1.6 B$ on minority investments and "other" activities they could change cash flow by +3.2 B$. Of course, removing all 1.6 B$ from inventory build up would have (a la Feschbach) affected operating earnings... and put them at 900 M$ proforma operating loss... which could single handedly single-digit their stock... but they could survive as a business. Removing the investment & other lines would probably hurt a lot of the future growth rate. So these two cash conserving activities would hit the stock price like a kick below the belt followed a few quarters later by a chop to the back of the head. Cost savings (R&D, S&M, G&A) is not as big an opportunity for them. Even if they cut back to Jan 2000 levels, savings is about 1 B$ quarterly. So you know it's VERY tight when the nickles start coming out of this jar. Again, cutting back the growth machine of a company sporting a PE more than 1.5x when it was growing like a weed... well... it I can't stretch that far to think the market would be so forgiving. No, I'm not worried about them being around. Even 10 B$ is a lot to chew through, and mindmeld is correct that they are generating lots of cash. Instead of paying with cash, they could pay the debt from a line of credit. Leverage. This is why mature companies carry debt. Like most people carry a mortgage. It isn't a bad thing. Just not as good as not having one. But I wouldn't be buying the stock at $15 under these conditions either. Not until I see how the stress on the business is relieving itself. John.