Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: SouthFloridaGuy who wrote (59404)	5/9/2002 6:45:37 AM
From: Zoltan!	Read Replies (2) \| Respond to of 77400

The competition are the walking dead. For many, their strategic response will be to try to avoid bankruptcy. For others, it will be to shrink to survive. Cisco will emerge from the tech recession stronger vis a vis its competition than before the recession. Cisco reported high end router sales were down 10% yet they gained market share. That means Juniper is now probably below a 25% share of high end router sales. Cisco grew sales over last year while sales at NT, LU and JNPR were down a combined 43%. Cisco has $21 billion in cash and no debt. LU and NT are saddled with huge debtloads. Cisco throws off hundreds of millions in free cash flow each month. ....Cisco, which saw revenue grow 2 percent in the third quarter from the same period last year, managed to show an increase, while many competitors posted declines. Companies that faced or are facing difficulty in their most recent quarter include Juniper Networks and Sycamore Networks. "We believe that working in Cisco's favor is the virtual complete self-immolation of its primary competitors for the service provider market. Nortel and Lucent are the walking wounded, Marconi is on the ropes, and Alcatel appears to have a full set of challenges," said Needham analyst Tad LaFountain in a research note. "In a perverse way, the decimation of the service provider market is probably the single best thing that could have happened to Cisco," he said. Other analysts echoed those comments, adding that Cisco's success is partly attributed to the fact it gets the majority of its revenue from enterprise customers, not from ailing telecommunications providers as its rivals do. Routers accounted for 30 percent of Cisco's sales in the quarter, switches represented 40 percent and services were 17 percent, with access products and other categories making up the remainder. Cisco's balance sheet is also in better shape than its peers. Cisco's ended the third quarter with $21 billion of cash, short-term investments, and investments with no short- or long-term debt.... news.cnet.com

To: SouthFloridaGuy who wrote (59404)	5/9/2002 6:49:49 AM
From: Zoltan!	Read Replies (1) \| Respond to of 77400

RESEARCH ALERT-Merrill raises Cisco earnings views 5/8/02 9:00 AM Source: Reuters NEW YORK, May 8 (Reuters) - Merrill Lynch on Wednesday said it raised its outlook for Cisco Systems Inc. through 2003, a day after the No. 1 maker of gear that directs Internet traffic said its quarterly profit more than tripled. The investment bank increased its targets for calendar 2002 operating earnings per share to 49 cents from 39 cents, and to 58 cents from 51 cents for calendar 2003. ``Cisco's balance sheet continues to be stellar,'' Merrill Lynch said. ``Cisco's dominant position in data networking, current reasonable valuation, and potential signs of recovery easily justify our intermediate term 'buy' rating.'' news.cnet.com

To: SouthFloridaGuy who wrote (59404)	5/9/2002 9:44:56 PM
From: Stock Farmer	Respond to of 77400

Haven't done my traditional once-over of the results yet. Might as well keep at least a few of my posts on topic. Yes, that was a good report. No reason whatsoever to spike the price by 24% however, at least not that I can see. In theory, shareholders own a fair share of equity. When we do our estimates of future value based on free cash flows, we assume that earnings (plus D&A minus capex which adds and subtracts to zero in the long term) accumulate to our favor and that discounting this future sum to today gives us a net future value. In other words, we expect earnings to find themselves 1:1 translated into equity. Such was not the case here. Cisco reported 729 M$ in earnings this quarter, and yet Shareholder Equity only increased by 276 M$ this quarter. This is inclusive of any unrealized gains on investments, and any "benefit" from selling slices of itself vis-a-vis options. Which has dwindled to a meagre trickle in terms of benefit to cash flows. Thus rendering quite obvious the concern I expressed last year that when stock option cash flow subsidy evaporated, would the company be able to build equity (grow) at the pace embedded in the stock price. Why is this a concern? If Cisco manages to keep only 276/729'ths of its earnings as they come in on a go-forward basis, then it's worth about a third of any rational DCF analysis. Which would take even mindmeld's wildly optimistic $15 into the mid single digits, and mine getting close to fractional digits above tangible book value. This is hardly good news. Put it another way. Equity grew by 1% of stock price annualized. On a revenue growth rate of 8% annualized. Forget T-bills, that's comparable to returns from a decent checking account. The difference in 276 M$ Equity Growth versus 729 M$ Earnings seems to have stock buyback as the major component. Net of funds received due to shares issued, the company spent 299 M$ to reduce outstanding shares: weighted average went from 7,311 M to 7,306 M. Wowsers. A net reduction of 5 million shares!! At this rate, the company could reduce shares outstanding by another 350 Million shares (a whole 5%) before depleting the entire base of cash, cash equivalents and investments!!! Apparently, dilution continues to be a very expensive proposition for shareholders. It is difficult to find the other missing 150 M$, which probably leaked out in dribs and drabs here and there. Without the 10-Q I can't tell, and even then it may be impossible. As to the 729 M$, some have remarked that it is artificial. I could see no evidence of that, it looks quite legitimately like earnings growth. Achieved in advance of top-line growth by squeezing in the middle. Gross margins improved from 62% to 64%. Which understates actual comparative performance (good news) due to reduced amount of "free" components and cookie jar deferred revenue. I note with some unsatisfied curiosity that the majority of reduction in inventory (net) is due to an increased inventory provision (see operating cash flows, + balance sheet). Cost of Operations also improved, mainly 'cause the company squeeked out another 1.5% by further cuts to Marketing and R&D. The corporate (G&A) line actually increased by 10% (3.1% of revenue up 0.3% from 3.1%). Maybe due to an increase in the budget of the spend police? <gg> These increases were partially offset by a reduction in interest and other income by 16% (-29 on 176 in Q2 to 150 M$ in Q3). Almost too good to be true, and in truth much better than I would have thought possible. Although we need to keep watching to see whether the company can hold these ratios. From a Free Cash Flow perspective, the bad news is -614 M$, basically due to a huge expenditure on property, plant and equipment of 1,761 M$ partially offset by 418 M$ Depreciation & Amortization. Numbers in last quarter were 190 and 476 respectively. I'd want to understand more completely what was in this line. In addition to retiring of synthetic lease, good place to bury any upward revision in capitalized operating costs, which would benefit margins at the expense of cash flow. For example. Trying not to cast too much negative light on what was otherwise a good report. Except in the wake of a 20+ percent jump in share price, it isn't any where near that good. John