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

To: pfalk who wrote (67933)	5/19/2005 5:02:32 PM
From: RetiredNow	Read Replies (3) \| Respond to of 77400

That's interesting, but I'm not sure I agree. A company will do whatever it takes to increase the stock price. If they have a large cash hoard, there are several things they can do. * They can acquire other companies to grow revenues and earnings, if they can get a good return on their investment, which increases the price of the stock once the acquisition is determined to be accretive. * They can pay out dividends to make holding shares more valuable, which generally increases the price of the stock. * They can buy back stock, if the company determines the stock is worth less on the market than the company believes it should be worth. This will generally increase the stock price as well due to higher EPS. All of those stock price increasing schemes are legitimate and are available to a company that is a well-run, cash generating machine. I would argue that Cisco didn't get its large cash hoard by higher idiots. So the people they hired have engineered the company to be a cash flow machine. Increasing the stock price benefits both shareholders and employees. Buying back stock is a legitimate way of doing this and it should not be done along with a penalty to the very employees who have made that possible. Now what John S. will no doubt tell us is that they wouldn't have all that cash in the first place if they didn't give so many options away during the 90's, which were then exercised and sold, generating a huge cash pile for Cisco in the form of a secondary employee-based share sale. But I'd argue that this is true, but since 2001, the cash Cisco is generating is 95%+ coming from operations, not from options exercises. So the employees deserve the benefits of any legitimate mechanism to increase the stock price, since the employees have enabled the company to generate this much cashflow in the first place.