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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (50377)	2/16/2002 4:20:39 AM
From: techreports	Respond to of 54805

The recent earnings report from CSCO, indicates their business is doing much better than their overall market, indicating they are growing market share. Last September/October, I had thought that Cisco's business wouldn't turn around until 2003 (or even 2004), so I would wait for a lower stock price. But the turning-point seems to be already happening, in spite of the fact that corporate IT budgets are overall flat (2001 to 2002), and telecom equip capex is likely down again in 2002. For the last 3 quarters, CSCO sales are up (4.3,4.4, 4.8B), and gross margins are up (52% to 54% to 57%). Gross margins are up, but I think they said they don't expect them to continue to move up. Cisco sold some of that inventory they wrote off, which they can't do again to help earnings and margins. Cisco, while they compete in the telecom carrier market, I would think most of their revenue and profits come from selling products to the enterprise. Even if you increase the current estimate for 2002 ($.32) by 50% to $.48, you still get a PE of 35.4 at $17 per share. 30% growth for a 20 billion dollar a year corporation is not very likely over the long term. As things stabilize and rebound, Cisco could enjoy 30 or 40% growth for the next year or so. Intel, for about 15 years, was able to do about 22% earnings growth. Just to give you an idea. As for Cisco taking share from Juniper is still quite questionable. Cisco probably combines it's sales to the enterprise as well as to carriers. Juniper had more new age carriers, which are going bankrupt which effects Juniper more than Cisco. So not necessarily Cisco taking share. Some feel that these are two totally different markets. Cisco's gorillaness in the enterprise does not mean they'll dominate the carrier market. I'm not an engineer, nor do I work for a telecom carrier so I can't agree or refute this theory. Lastly, Cisco has improved their sales. You can't really fake this like you can with earnings (it's much easier with earnings anyhow). Although, is this really a turning-point or just the end of the flood of used equipment put up for sale by companies going bankrupt? Hmm..I think you can take this as the end of the slide. Whether a rebound is in order is another question. If we get that so called second half recovery, then Cisco should see good revenue growth. Make no mistake about it, this was one of the worst times in technology, yet Cisco still receives a price-to-sales ratio of 7? I guess the market is saying this company will win and is no Lucent or Nortel.