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

To: RetiredNow who wrote (55586)	9/23/2001 12:06:58 AM
From: Stock Farmer	Read Replies (1) \| Respond to of 77400

And if wishes were horses then beggars would ride. First, what Wall Street wants a company to do and what the company should do are two different things. You know that. The management of the firm has no business putzing around with the stock price. Period. Particularly if it's ineffective use of capital. You failed to answer my question. What is the net benefit to shareholders of a stock buyback when Price to Book is much greater than 1? Second, who said anything about trailing earnings. I was certainly talking future. CSCO must earn 75 B$ profits in the future to be worth $10/share. Count 'em. 7.5 Billion shares at $10 each makes 75 Billion dollars of economic value waiting to be generated. Nobody would pay 75 B$ for something that's only going to generate 50 B$. In present value. Expectation value. Dilution and inflation and risk adjusted. Oh, you want a decent return on your investment too? Add that on top. Using 4%, 6%, 10% and 9% respectively and Cisco growing at 20% per year.... well, we have Cisco worth about $9.00 per share if that 20% growth starts from $1/share!!! Which is about an order of magnitude away from where we are today. Oh. And if they can get $1.00 on a base of 18 B$ revenue, then in year 20 they'll be doing 700 B$ worth of revenue. As if. Your 20% per year growth is "ambitious". I bet closer to 12% average. Re-computing the numbers and you have Cisco generating about $5.35 risk adjusted economic value with a year-20 revenue of just under 200 B$. That's more like it. And still very ambitious. So I've at least got some science behind the growth story. Third, yes I'm making it simple. Overly simple. Because even as simple as it is you seem to be struggling. When we get the simple bit straightened out we can start adding a few of the complex things. But they only serve to raise the bar. If it doesn't clear the low hurdle, it won't clear the higher ones. Fourth, you are up to old tricks again with silly assertions. Like: They are starting to lower O/S shares. Care to show me that the number of shares they have is going down? The only numbers I see show up. The last assertion you made like this was that stock options were a negligible fraction of dilution. Fifth, You say Cisco will be worth $20 by some people's measurs. Actually, CSCO is easily worth $30 by some people's measures. Your own for example. Go back to the thread and look at your price predictions, discount back by 5.8% (T-Bill return). Some people even thought it was worth $70 by their measures. Or $47, or $30, or $20. Get the picture? Too bad for them, it's worth what the market computes. And in case you hadn't noticed, the market is starting to factor in economic value. Anyone still using "PEG" [let alone on a mature cyclical company] deserves to be taken to the cleaners. I am sorry that the numbers add up this way. I would love to discover that Cisco is worth a lot more than it appears. I've got a pile of cash and stuff that's growing mildew that I'd love to deploy for the long run. And I will deploy it. Just not yet. John.