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

To: RetiredNow who wrote (52673)	5/9/2001 10:04:49 AM
From: JakeStraw	Respond to of 77397

A Tough Outlook for Cisco internetstockreport.com By Paul Shread May 9, 2001 - If investors were looking for signs from Cisco Systems that networking and telecom equipment spending had bottomed, they didn't get it. In fact, the company's conference call last night gave the impression that both the enterprise and service provider businesses are still declining. Cisco (NASDAQ:CSCO) said it sees some positive signs that suggest a bottom is possible in the next 1-2 quarters, but the company also warned that its visibility is still very low. CEO John Chambers used the word "challenging" more than 20 times in the conference call, by one count. Not what investors had hoped to hear when they ran the stock up $1.38 ahead of the earnings report. Cisco was trading down by about that much this morning; that's about the best news that came out of the earnings report. For the record, Cisco earned 3 cents a share, excluding charges that gave it the first quarterly loss in its history. That was a penny better than expected, but down 78% from a year ago. Revenues fell 4%. The company still expects revenues in the July quarter to be flat to down 10%. But that's only if consumer spending in the U.S. does not deteriorate significantly and if CapEx spending in Asia stabilizes. Chambers reiterated his comment that a decline in business of this magnitude has never been seen in a company of Cisco's size before. That's all the more shocking, since Cisco of the 1990s had the best run of any company since IBM in the 1960s. Cisco is competing with its own second-hand products offered for sale by distressed companies, such as failing dot-coms. The good news there is that our eBay indicator has stabilized at about 2400 Cisco items offered for sale over eBay. But that's only a small part of Cisco's business. Key enterprise markets such as financial services, high-tech and manufacturing have yet to rebound and are still under pressure. And CLECs, long-distance carriers and service providers could be a tough market for the next couple of years, as the more than 400 companies in those areas begin to consolidate. Chambers continues to claim that Cisco will grow 30-50% a year over the long run, but former company executives and analysts are now saying that 15-20% is more likely. At 53 times July 2002 estimates, that makes Cisco one pricey stock at $19. The company's fundamentals could be better than anyone expects if the economy rebounds strongly from the Fed's rate cuts. But stocks are like buses, as they say; another one will come along. This one is worth skipping, at least at these levels.

To: RetiredNow who wrote (52673)	5/9/2001 11:15:31 AM
From: Stock Farmer	Respond to of 77397

"But right now, I don't see ..." You see what you want to see my friend, we all do. I don't see earnings justifying more than $10 as a stock price. Somehow you see more than $20... But I do enjoy your struggles to show me the light, as I hope you enjoy mine! John.

To: RetiredNow who wrote (52673)	5/9/2001 9:09:37 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 77397

re: So when the market grows, of course, most of that growth will go to Cisco Yes, this is clear, just by looking at the balance sheets and market shares. And that is why, when I do take a LT position, I'll only buy CSCO in this sector. But that is not a good argument for buying CSCO today. Comparing them to their peers is useful for deciding which stock to buy, but tells you nothing about when to buy, or at what price. Those questions are best answered by asking the question: How much longer is this sector going to have deteriorating fundamentals? Deciding a "fair value" for CSCO stock depends on the answer to that question. If the problem was just stuffed channels and overinventory, we could be near a bottom now. If the problem were just overcapacity, then we could be near a bottom (next one or two quarters). The real problem, however, is debt. All of CSCO's customers have too much debt, and lots of them have inadequate cash flows to service that debt, much less buy any more of what CSCO makes. I read somewhere recently that telcos (in N. America and Europe) had piled up 700B in debts in the 1990s. An unknown amount of that is going to be written off. 100B? 200B? More? How many of the dotcoms and CLECs are going to be owned by the unhappy banks that lent money to them? Half of them? 90%?? The point is that this process is just beginning. In other industries, when this kind of situation happens, it usually takes several years till enough capacity has been taken out, and enough companies have been merged or liquidated, and capital spending resumes. And, even then, capital spending doesn't resume at the same rate as before. I'd say we are in about the second or third inning of the game.