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

To: chaz who wrote (62766)	1/24/2003 4:23:01 PM
From: Lizzie Tudor	Read Replies (1) \| Respond to of 77400

chaz, Serious question here. We few here may conclude that many (if not most) tech companies are really shell games run by insiders to benefit themselves and employees before outside shareholders, and thus are and likely will be lousy long term investments. If you feel that way then why not move on to other investments? Thats what I don't get, really. Somebody on the oracle thread is trying to convince people of the same thing, that tech is a shell game and a bad investment. Unfortunately on the oracle thread there are a lot of oracle employees that just happened to work there when the company was doing less than 100mm/qtr in revenues. Kinda tough to make that shell game argument under those circumstances, and yet he is trying to do so. Same deal with cisco if you ask me. It seems the entire game with tech is picking those winners and if you feel you can do that, the returns are phenomenal, nothing new about this... just typical of emerging markets of any kind. Lizzie

To: chaz who wrote (62766)	1/24/2003 4:23:22 PM
From: rkral	Respond to of 77400

chaz, the kudo is appreciated but ... I've been just a sponge on the FCF and wealth creation topics .. trying to soak up enough to ask an intelligent question. Ron

To: chaz who wrote (62766)	1/24/2003 7:22:07 PM
From: Stock Farmer	Read Replies (2) \| Respond to of 77400

Great question chaz, Really great question! In precis, does it matter whether the company makes money or not, if there are folks out there willing to buy shares for more? Of course, answer is no. All it takes to make a good return on investment is to fob off my pieces of paper on someone else who pays more than I paid in the first place. Regardless of what the pieces of paper are worth. While it is possible to profit from the ignorance of others, the sum of the wealth changes of all participants must exactly equal the wealth generated by the firm, minus frictional costs of changes in ownership. The nature of reporting can therefore have no effect whatsoever on the total wealth change of the participants on average (e.g. goodness of the investment on average), however it has a profound effect on the distribution of this wealth between participants. It's a matter of paying attention to the odds at the table, rather than the current roll of the dice. Regards, John

To: chaz who wrote (62766)	1/24/2003 8:08:10 PM
From: RetiredNow	Respond to of 77400

Here's my dichotomous answer. First, I think Cisco can be an enormous wealth builder for shareholders, but they need to reform the company by largely curtailing stock options issuance and expensing it when they do issue them. Then they need to continue to whittle away at the o/s share number and perhaps consider a dividend. That will provide very good EPS growth over time, as well as keep the stock growing. Without at least the reforms related to stock options, this isn't a good stock to own. Now on the other hand, I firmly believe in the greater fool theory, which makes me believe this stock will skyrocket when the economic recovery starts to really roll and when the geopolitical picture clears up. Now the way I'll play it is this. I haven't owned Cisco for awhile, despite having tripled my money by owning it in the past. I also don't plan on owning any, until they make the reforms I listed above, or unless it swings back down to $7-8 per share. If it got that low, you could make 50% easy on a short term trade. JMHO. If you want to know where my sweat-money is, it's in a very well diversified portfolio managed by a financial planner. Anything I do in Cisco, will be change I can afford to lose and not have the wife all over me about it. :)

To: chaz who wrote (62766)	1/26/2003 1:48:55 PM
From: hueyone	Read Replies (1) \| Respond to of 77400

But do any of us doubt that when relatively positive reports-as-usual begin coming forth the price will move up, and if we're not in, we can't benefit, even if it's short term? By the time the reports get sliced and diced, do the many really care? Is it really just pay your money and hope for the best? Good question Chaz. First, let my preface my comments by saying that I don't have a clue what the answer is, but I will be happy to offer some ramblings which are worth what you are paying for them---zero.<g> I have to believe that over the long term life of a company that the stock price will circle around the intrinsic value of the company. So sure, these companies could take off like gang busters again, but when you buy well above the intrinsic value of a company, you are taking the risk that the market could move back into a period where the market values companies at or below their intrinsic values. I haven't seen anyone make a believable case for any tech stock on any of these threads, not one, even with the drop of the last two years, that a tech stock is selling at or near its intrinsic value, and if this bear market is like most bear markets, I worry that all the dirty laundry will have to come out before stocks can move up again in a significant manner, meaning stocks may approach intrinsic values or even less than intrinsic value before we see see a serious upwards bull market. I also see some potentially troublesome issues lurking on the horizon that could be catalysts to help nudge tech stocks closer to my estimates of intrinsic values: 1. The FASB decides to require companies to expense stock options on the income statements. 2. Institutional investment sentiment changes towards expensing stock on the income statement regardless of whether the FASB requires it or not. From what I am able to gather, a great number of institutions have a subscription to Standard and Poor’s Core Earnings numbers now, so the general awareness regarding the failure to expense stock options (and its impact) is much higher than it has been in the past. Remember, the Council of Institutional Investors has been pushing for the FASB to require expensing of stock options. Perhaps like me, they have grown weary and apprehensive about playing the greater fools game. 3. International dollars leave our stock market not only because of the falling dollar, but because the International Accounting Standards Board requires expensing of stock options, and the international community quickly realizes that our emporers have no clothes. 4. The reported performance numbers for tech stay down much longer than expected. Remember, not only were the earnings numbers inflated by failure to expense stock options, but many of the companies were trading on inflated pro forma earnings rather than GAAP numbers. The Gaap numbers were generally much lower than the pro forma numbers, and it now appears that the general market sentiment has swung away from giving the pro forma numbers a free pass with the wink, wink, nod, nod, “we know these numbers are crap, but we will buy and sell on these numbers anyway” type of analysis. In addition, new reporting rules requirements call for companies to more prominently display Gaap earnings and prominently explain the difference between Gaap earnings and reported pro forma numbers on the quarterly reports. 5. Unwinding from the stock options excesses of the nineties puts a further drag on companies reported earnings. a. Shareholders revolt against excessive stock options packages and cash employment expense for employees rise as stock options become a less viable substitute for the employees. b. Dilution from excessive stock options puts a cap on further stock price appreciation. For example, Sebl has 194 million options outstanding at a weighted average exercise price of $18.06 just waiting to cap the next rise. c. Shareholders begin to see tech share buybacks in tech for what they really are---an expensive reduction in shareholders equity for the purpose of counteracting share dilution from stock options exercise. d. And insiders continue to dump shares as fast as they can. The above potential risks, along with the fact that I am in a risk averse, capital preservation type of mood, will probably keep me sitting mostly in cash on the sidelines a while longer. I am sure a good case can be made for a meaningful upside from here, but I will let Lizzie or someone else make that case. And again, my thoughts on market direction are worth what you paid for it. Say, anyone got any recommendations for companies selling at or below intrinsic value with a margin of safety? Regards, Huey