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

To: Yaacov who wrote (51195)	4/7/2001 7:54:46 AM
From: John Carragher	Read Replies (1) \| Respond to of 77398

this weeks Barron's watch Monday opening.... Buy or Bye? At 14 a share Cisco might be cheaper, but unless earnings rise it's far from cheap Review \| Preview Follow-Up: PC Punchout \| Follow-Up: Business Muddle Is it time to buy Cisco Systems? The bellwether stock of the Internet has plummeted 83% from its high in March 2000, and now trades at 14. The shares have fallen 78% since we wrote skeptically about the company's stratospheric valuation in a cover story last May ("Cisco's Bids," May 8, 2000) -- a story that prompted some of the most ferocious reader response of the year. We gave Cisco and its chairman, John Chambers, full credit for great products and great timing in bringing them to market. Hardly a byte of information on the Internet escapes transmission via the company's equipment. But Cisco's annual revenue growth, at its peak more than 50%, derived in large part from investing in and acquiring young companies that were developing cutting-edge networking products. And that strategy, in turn, depended on an ever-inflating stock price which at one point became the best deal-making currency in the world. For a while, things worked like magic. At an all-time high of 82 a share (adjusted for splits), Cisco boasted a record-breaking market value of $574 billion, and a price/earnings ratio of 234. Never mind that analysts expected the company's earnings to grow by only 60% a year. Few thought it suspicious that Cisco beat earnings estimates by a penny a share; to the contrary, they deemed it terrific. But we were among those few; if the company sported competitor Nortel's P/E, we wrote, it would sell for 35 a share, and if it borrowed Lucent's -- before that company's earnings vaporized -- it would sell for 16. So, is Cisco a buy, now that its shares have shriveled and its P/E has shrunk to 26 times last year's earnings of 53 cents a share? Many analysts who had remained bullish during the stock's long decline have of late thrown in the towel and changed their ratings to "neutral," which really means "sell." If the analysts were so wrong at the top, could they be wrong at the bottom, too? That is, if the stock's hit bottom. Last October, accounting professor Abraham Briloff opined in these same pages ("Pooling and Fooling," October 23, 2000) that Cisco's accounting for mergers and the issuance of stock options in lieu of cash compensation were all that stood between reported profits and a loss for the fiscal year ended July 31. Cisco's accounting is legal, and it conforms to Generally Accepted Accounting Practices, or GAAP. But it didn't conform to Briloff's concept of full disclosure and appropriate reporting. Since then, others have noted that Cisco's large portfolio of minority investments has suffered substantial losses. And it's clear that Cisco's policy of outsourcing research and development by acquiring companies with its high-priced stock has come to a complete stop. That could harm Cisco's competitive ability to keep up with technological change. Some observers also have questioned the quality of credit extended to the company's customers. Many customers are in difficult financial shape, and some are sending back cases of Cisco gear-and the associated bills-unopened. Now, back to our nagging question. At 14 or so, Cisco might indeed warrant a "buy" recommendation -- that is, if one could trust the "E" in the company's P/E. Alas, the company that was so meticulous about beating estimates by a penny doesn't command so much confidence since issuing a series of warnings in February to talk down estimates of last quarter's results. For the current quarter ending April 27, analysts' estimates are shrinking. In December, the consensus held that Cisco would earn 79 cents this fiscal year, and 20 cents in the April quarter. Last week, according to Thomson/First Call, the Street was looking for annual earnings of 55 cents a share, and third-quarter profits of only nine cents. Until earnings rise, or the shares fall further, Cisco is no buy. -- Thomas G. Donlan

To: Yaacov who wrote (51195)	4/7/2001 7:49:17 PM
From: t2	Respond to of 77398

if this bloody market has to turn, then it should from the last week in April! Has anyone noticed how negative people are on the market. I find myself shorting or hedging often and I am very bullish long term and have been for a while. I believe heavy inflows into hedged funds and bear funds has been causing this drop to be more severe. That new trend has to be broken before we head up and the only way for that is for mutual funds to load up with all their excess cash. In addition, there is so much shorting among the active traders also.