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

To: RetiredNow who wrote (54390)	8/8/2001 11:10:29 AM
From: Stock Farmer	Read Replies (3) \| Respond to of 77400

Mindmeld - As I said before, the forensics on Cisco without the cash flow statement are difficult - at best. I've been spending the summer on a cross-country driving adventure with my son, so you may have to wait for my analysis on this release. Will take a few days at least 'cause I'm not on line a lot these days as you can imagine. But I felt it necessary to use today's few moments online to respond. You say "if total cash and investments went from 20B last year to 18.5 B$ this year then at that rate they will be able to survive another 12 years" Let's look at it slightly differently. Two views. Cisco's total cash and investments actually went from 20.499 B to 18.517 B$. Then factor in a 343 M$ increase in other (not cash & equiv) current assets offset by a 2900 M$ increase in current liabilities for a total 4539 M$ net negative asset shift. Oops. Or how about another way. You say "yippee, the company made 6.6 B$ of cash" and make a big deal of that. They started with $20.5 B, added 6.6 B$ worth of cash and ended up with 18.5 B$ out the other end. Someone misplaced 8.6 B$ So as an external shareholder and depending on how you account for things, you should see between 4.6 and 8.6 B$ worth of something very real being quietly flushed during the period. Seeing as they started with 12 B$ worth of investments, half of which was insulated from the market... well... the flushing isn't just an exogenous factor that affected the value of their asset pile. Where did it go? The "low quality" assets of goodwill, property & equipment, lease receivables and "other assets" climbed an astonishing 4007 M$ (66%) while nobody was looking. Let's take your view that it all came about suddenly in the last six months. So if this keeps up.... well, that whole 18.5 B$ will be converted to JDSU quality intangible assets long before your 12.5 years is up at this rate. Mindmeld, I would be more cautious than you. The fundamental asset base that used to underpin CSCO shares has deteriorated considerably. It used to be almost entirely cash and government bonds. Now, more than half is squishy stuff and the trend is in the wrong direction and slurping up the cash flow from operations and financing and investments. In parallel, the growth story has evaporated and the absolute size of the business on which growth will happen is still contracting. Yet the price multiple remains very high. I suspect that the main factor keeping it up is a low rate of reality diffusion!! Yikes. John.