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

To: RetiredNow who wrote (51406)	4/15/2001 3:17:18 PM
From: Stock Farmer	Read Replies (2) \| Respond to of 77399

This is great quantitative analysis. Some observations. 1. Loan to own. True most revenue is in low-risk enterprise. But is credit distributed evenly with revenue, or concentrated in segments where vendor financing is "par for the course" like Carriers? Your number might be low. 2. Inventory. In '97 and '98 it ran at 4% of annual revenues. In '99 it ran 5%, '00 at 7%. Assume 4% is healthy. Even giving '02 revenue of 27 B$ puts "healthy" inventory at about 1 B$ vs 2.5 B$ reported for 1.5 B$ excess as of Q2. Inventory typically runs 20-30% raw mat's and 50% wip/fin/demo. Comparing 2Q reported inventories against reconstructed healthy target we have excesses: Raw mat's target 200 M$, Actual 900, excess 700 (3.5x) Wip/fin/demo target 800 M$, actual 1600, excess 800 (2x) In light of these, your target of 500 M$ looks low. Might want to ratchet up to range 600-800 and plan to see it over two quarters. 3. VC fund. It was a cleverly constructed repurchase of stake in CSCO Japan. Total closer to 200 M$ with OPTION to sink in $1B. Where this shows in the books is anyone's guess, but note 500 M$ incremental restricted investments recorded in 2Q, so it might be there. 4. Buildings owned and not leased show up under depreciation and ammortization. Which CSCO excludes from pro-forma as one time charges... (as if... see why I hate pro-forma numbers?). Buildings leased show up as allocations across the various functions (COGS/R&D/S&M/G&A) 5. Severence. We see similarly. Further may be in the works, but this one is known. 300-400 M$ 6. A/R. Trend: all over the map as a % of revenue. Your guess as good as mine. 0.5 B$ 7. Investments: this won't come as a writedown, just a mark-to-market "change in unrealized gains from investments, net". Credit 300 M$ Incredibly enough, as is the case, you and I disagree on the specific points but net out at the same bottom line. And again, this is good quantitative analysis. John.