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To: Kelvin Taylor who wrote (30896)	4/17/2001 8:04:43 AM
From: DanZ	Read Replies (1) \| Respond to of 53068

Kelvin, I think it is fair to say that Cisco will have a hard time growing revenues 50% from their ~$20 billion 2001 base, whereas their revenues grew about 50% in each of the last two years from an $8.5 billion base in 1998. My gut feel is that growth of 10% to 15% is too low. The Internet isn't going away and corporate LANs aren't going away. In fact, there is plenty of room for growth here and Cisco is clearly the market leader in a space with few competitors. The inventory write-off is a one time occurrence, and I don't think it will put sustainable pressure on the stock price. I think that the slowdown in the worldwide economy has made corporations cautious about making investments in their WAN/LAN infrastructures, and once the economy turns around, there will be a lot of pent up demand for Cisco's products. The company's five year growth in sales is 53%, and I don't think that it will fall as low as 10% just because of a slowdown due to the business cycle. If the decline in Cisco's sales was due to something other than a normal decline in the business cycle, such as poor products, loss of market share, or a sustainable decline in the demand for their products, then I wouldn't touch the stock even where it is trading. I don't see that as being the case and think that their growth will be near the current range of analysts (28%). I can see this being shaved to 20% to 25%; hence my opinion that the market may maintain the PE of 25 to 30. A stock such as Cisco doesn't give up its PE very quickly, especially if institutions think that the decline in sales is due to the cyclical nature of the business cycle. Also, PE ratios are normally higher when interest rates are low relative to periods when interest rates are high. I am not as negative on Cisco as you appear to be, although I don't think it is out of the question that the stock could trade to 10. This is one of those cases where I would phase into a long term position between 10 and 15. One would have to be lucky to pick the bottom, but I think that the stock will perform better than the market over the next year from an entry below 15.