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

To: RetiredNow who wrote (58549)	3/18/2002 8:41:07 PM
From: Stock Farmer	Read Replies (2) \| Respond to of 77400

So either way, it's a single digit stock. Yikes! What's the world coming to? Me praising the company's impressive cash flow, and Mindmeld admitting a fair value in single digits? The bottom must surely be near. Here's how I would compute the missing expenditure, taking your figures so you'll recognize them all. I think it will take a lot of digging to dredge up the actual amounts on a year-by year basis. But we can take a stab at the total. They started out with assets, bought more, depreciated some along the way and have some left. We can work backwards to find out how much they bought, 'cause we know everything else. Category M$ ( Source ) Existing PP&E , Net of Depreciation 2,502 (10-Q 2Q'02) Existing Goodwill & Intangibles, Net 4,550 (10-Q 2Q'02) ----- Current Depreciables, Net 7,052 (subtotal) Add back depreciation 5,270 (mm spreadsheet) Add back Amortization of Goodwill & Intangibles 3,131 (mm spreadsheet) ------ Total Undepreciated Present Assets 15,453 (subtotal) Minus Previous Assets (Beg, FY 96) - 137 (FY 95 10-K) ------ Necessary Expenditure 15,316 (subtotal) Minus Expenditure Accounted For - 5,621 (mm spreadsheet) ------ Expenditure Not accounted for 9,695 M$ Factor that into the free cash flow calculation and let's see what you get? Ouch. One of these days Cisco's shareholders could wake up and start asking the board of directors some pretty sharp questions. I wouldn't want to be on the board when that day arises. As far as "running out of good reasons to dispute the low valuation of this stock"? Better late than never :) If what we are computing is truly indicative of economic value (and I think so), then we can hardly call the current price "low". John

To: RetiredNow who wrote (58549)	3/18/2002 11:10:11 PM
From: JeffT	Read Replies (1) \| Respond to of 77400

mindmeld, as I have said before, DCF is an exercise in futility. In my business your calculations have real value. Businesses are bought and sold everyday based on DCF. It is valid in many cases. For placing a value on Cisco - it is totally worthless. No value whatsoever. No one is going to buy Cisco as an entity. Only nutty investors like you and me decide to buy a few shares at a time. We will make money or lose it because of supply and demand on the exchanges. Does DCF have an effect on supply and demand? You could make an argument that it does, but you would be wrong. I think what really moves the market for Cisco, like today for example, is not your DCF model but rather "fear and greed". That's it. Your calculations are interesting, but actually quite worthless when trying to figure out where Cisco will be price wise tomorrow or next year or five years from now. Also, all the talk I hear about calculating "fair value" is actually quite silly. The market does that everyday for us. The valuation method that is used is not called DCF but NASDAQ. <g> Keep up the good work! Jeff