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To: Cary Salsberg who wrote (21105)	8/2/2001 7:56:42 PM
From: sea_biscuit	Respond to of 24042

CSCO and INTC executives dream of 30-50% growth per year. They seem to have missed the last year, or are they disingenuous? On this matter, I can do no better than quote the words of wisdom from the master, Warren E Buffett : One further thought while I'm on my soapbox: Charlie and I think it is both deceptive and dangerous for CEOs to predict growth rates for their companies. They are, of course, frequently egged on to do so by both analysts and their own investor relations departments. They should resist, however, because too often these predictions lead to trouble. It's fine for a CEO to have his own internal goals and, in our view, it's even appropriate for the CEO to publicly express some hopes about the future, if these expectations are accompanied by sensible caveats. But for a major corporation to predict that its per-share earnings will grow over the long term at, say, 15% annually is to court trouble. That's true because a growth rate of that magnitude can only be maintained by a very small percentage of large businesses. Here's a test: Examine the record of, say, the 200 highest earning companies from 1970 or 1980 and tabulate how many have increased per-share earnings by 15% annually since those dates. You will find that only a handful have. I would wager you a very significant sum that fewer than 10 of the 200 most profitable companies in 2000 will attain 15% annual growth in earnings-per-share over the next 20 years. The problem arising from lofty predictions is not just that they spread unwarranted optimism. Even more troublesome is the fact that they corrode CEO behavior. Over the years, Charlie and I have observed many instances in which CEOs engaged in uneconomic operating maneuvers so that they could meet earnings targets they had announced. Worse still, after exhausting all that operating acrobatics would do, they sometimes played a wide variety of accounting games to "make the numbers." These accounting shenanigans have a way of snowballing: Once a company moves earnings from one period to another, operating shortfalls that occur thereafter require it to engage in further accounting maneuvers that must be even more "heroic." These can turn fudging into fraud. (More money, it has been noted, has been stolen with the point of a pen than at the point of a gun.) Charlie and I tend to be leery of companies run by CEOs who woo investors with fancy predictions. A few of these managers will prove prophetic, but others will turn out to be congenital optimists, or even charlatans. Unfortunately, it's not easy for investors to know in advance which species they are dealing with.

To: Cary Salsberg who wrote (21105)	8/3/2001 8:58:20 AM
From: RetiredNow	Read Replies (2) \| Respond to of 24042

Hi Cary, as far as Cisco's dreams of 30-50, I too believe they are overly optimistic. However, not by far. I think it is still possible for Cisco to return to a 25% growth rate. Many of their products are very fast growers: metro gear, wireless access gear, Long Reach Ethernet, content switches for CDNs, storage networking, VPN gear, contact center platform, etc. They still have leadership positions in many tornado markets. You can't ignore that, because when the economy turns around mid 2002, those markets will come roaring back above 25% growth.