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

To: john dodson who wrote (51202)	4/8/2001 11:05:42 AM
From: Stock Farmer	Respond to of 77398

John - A well considered response. Deserves one in kind. <<No matter how big the cash pile, it can't last forever if it must sustain the company in the face of neverending deterioration. However, I do not particularly subscribe to the neverending part. But one never knows. Besides, no CFO would let a company burn its cash reserve to extinguishment with other options staring the company in the face. >> We are fully agreed. <<CSCO's already frozen acquisitions, which admittedly are mostly financed as stock swaps, ...>> At current burn, 200 M$ cash conservation per quarter if frozen. 10% leverage. At what cost? Shutting off the fuel for growth. Very dangerous short term gain for long term loss, particularly for a company priced for aggressive growth. Stock is priced as "aggressive growth". Caution. <<... but they've also done some symbolic cost cutting. >> Yes. Symbolic. My note earlier, $1B if they cut non COGS run rate back to Jan 2000 levels against $3B drain rate. Also note that it is mighty hard to sustain a bigger business on a same sized run rate... especially hard on the hampsters who run on the wheels. <<Not to mention the fact that the company is still pretty profitable.>> Depends on the measure of profitable. I like cash in minus cash out. Doesn't appear to me that CSCO would be profitable in terms of cash flow based only on its core business of selling Internet gear. Allocating costs appropriately. It is profitable in current incarnation, but only because of bouyancy in capital markets. Which is undergoing a slight modification in case anyone noticed. So, either unprofitable, or new incarnation. All thoughts go towards "incarnation" because the alternative is unthinkable. Thus, the Fifteen Dollar Question is whether or not the new incarnation will be as-or-more-or-less profitable compared to the old incarnation. This remains to be seen. We have no visibility, but you will get some in a few weeks... although the gauze on the pro-forma curtain may be thicker than usual. <<Actually cash+equivs and short term investments, which are nearly as good as cash, were about $4.78 billion at Q2/01's end, down about $1.6 billion from the previous quarter.>> Yes, one can slice and dice and julien fry the numbers in many ways. That is the beauty of being a kitchen magician. I am content with total access to capital = cash+investments (ST+LT)+ borrowing. Cash is king and occupies a special palace. After that, whether a non-cash dollar is investment (ST or LT) or borrowed... I don't care much. Feel free to use many piles. I choose two. It is also easier this way because the company reports for me. <<However, one quarter does not a trend make... [plus string of numbers getting bigger then smaller then smaller then bigger and bigger and bigger and bigger and smaller]>> I agree. One time events are to be treated with suspicion until a trend is established or broken. Two separate observations. First, the forces that led to the break in any recent "trend" were only partly felt in quarter. What might this tell you about the magnitude of the force? Where might you see the previous "trend" resume? You must force yourself to guess here if you would be a buyer or a seller at these prices. Or admit an irrational purchasing bias. I confess I am neither buyer or seller, precisely because trend is inobvious and force currently looks larger than appreciated and less "temporary" than anticipated. Second, the topic of "one time" events. These quarterly cash positions are even less significant as a trend than the 71 "one time" events that have been swept under the proforma rug with other business dust in the past few years. So one could dismiss all as "trendworthy" and focus only on current differences: this from last. Which is less than encouraging. <<My main point was simply that CSCO has more than enough cash to weather a pretty sizable storm. And as you mentioned no debt and relative financial strength compared to competitors. >> We are fully agreed here too. <<Question is how much cheaper will it get? I don't claim to know, ...>> ... yet you answer ... <<... but I do know that it's cheap enough for me to continue nibbling on. >> Which is fine. You are not alone, looking at the millions of nibbles that occur at this and higher and lower prices. The market requires people like you to nibble, and other people to feed you your nibbles. And people to look on and question. Not always the same role for the same person. Me, I nibbled years ago and fed nibblers last year. I suspect I will nibble again. But just not now. Now I question. <<Good luck!>> And same to you sir, John.