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

To: Wyätt Gwyön who wrote (62115)	10/23/2002 1:46:57 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 77400

LOL... Mucho, remember how annoying it was when Ed the Thread Genius used to post those 5 year charts of Cisco as a reason to invest at $70? Better not to get trapped going there. Us die hard Thread Morons should know better. The key question for today is where forwards. Personally, I think the public still equates an increase in business must translate to an increase in stock prices, as though prices relate to current revenue levels and discount any thoughts of recovery. So we'll see short term up ticks as they calculate the same sort of simpleton math that led trillions of previous dollars to money heaven. But long term, I'm not so confident of a rising stock price. On the surface, an $11 stock price should command the prospect of $0.66 in perpetual risk-free dividends on a go-forward basis. That would make shares in the company equivalent to a 6% perpetual annuity, some of which are selling for a dime a dozen these days. To put this in perspective, that 21 Billion they have in the bank would bleed out in about 3 years. So I make things a wee bit tight just yet. And I just don't see a big up tick in IT budgets that would cause 17-20% more gear sales next year than this year and similarly thereafter. Not with GNP in single digit growth range. Think about it. If an enterprise increases its IT budget faster than the rate of growth of the company, then sooner or later the IT department is gonna get downsized! Indeed, if we go down further, I make things in the already-wired enterprise realm more static, returning to the pre-bubble norm where the typical IT budget grew at approximately the same rate as the rest of the enterprise, and existing activities were always under the "same as last year minus 10% for efficiency" mandate. Which leaves us with the unwired enterprise. And we're well passed the stage where only the early-adopters have a web page. Most individuals starting up a sole proprietorship have a web page! So we are pretty far along the path of IP penetration into enterprise. Sure, there's a lot of territory left to wire, but the early-adopting half of the curve has a conversion interval measured in weeks, while the laggards rounding out the other half of the curve act over decades. Maybe we'll see a doubling in enterprise market over the next couple of decades. Brings us to 40 B$ if Cisco gobbles up 100% market share. Right Jay? So much for enterprise. Next is telecom infrastructure. Even if the Carriers were feeling footloose and fancy free in the spending department, a wholesale displacement of undepreciated infrastructure wouldn't occur unless it knocks the price structure down by a factor of five or more. These beasts are glacial in behavior and despite vigorous death rattles neither LU nor NT have given up on their home markets. Which puts total revenue upside potential for Cisco at another 30 Billion or so, even if they end up buying both NT and LU. Brings them to 70 B$. When we were furiously exchanging discounted cash flow models, we found revenue rates of 100 B$ were on the trajectory to a valuation that made $10 look optimistic. And at the moment they're a Cisco and a half away from making ends meet. Which is no small gap to close. These are big numbers. The problem as I see it isn't an absolutely incredible revenue potential for the business. It's dividing what incredible potential exists out there by an almost equally incredible number of shares. And dividing X by something almost equal to X doesn't give 10. Investors entering at this price are still facing a gap between the past business and future business potential that still doesn't show signs of closing, IMHO. John

To: Wyätt Gwyön who wrote (62115)	10/23/2002 4:43:57 PM
From: Ed Forrest	Read Replies (1) \| Respond to of 77400

i think you have the wrong understanding of me. i actually think it is cool when stocks like CSCO go up, because it presents better shorting opportunities for me. in a bear market, i find it much easier to make money on the short side. (however, w/r/t CSCO in particular, i would like to see the stock rise a lot further before shorting it.) I fail to see any truth in that statement including the “I” that you seem to use more than frequently. To be brutally frank I see you as one of several that seek to infest this thread with FUD. Your kind disgusts me.