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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Joan Osland Graffius who wrote (11451)	12/12/1997 9:23:00 PM
From: bearshark	Respond to of 94695

Joan: Be careful with CSCO, I have some concerns about its financials. I will tell you about it tomorrow morning. I think I have had enough for tonight. SEG and VRC both know what single digit stock prices are all about. SEG went into a bear market pattern in the middle of this year. I almost cried when I saw it a couple of weeks ago.

To: Joan Osland Graffius who wrote (11451)	12/13/1997 9:20:00 AM
From: bearshark	Read Replies (2) \| Respond to of 94695

Hi Joan: I have spent the last two hours with CSCO's financials. Therre is a lot of information there. At its price, everyone must be looking at CSCO. My main problem with CSCO is that their quarter to quarter rate of sales increase if falling. That is not the year to year comparison but the same year' s quarter to quarter comaparison. During 1996, quarter to quarter sales were increasing between about 15 and 18 percent. Then they went to increases of about 10 to 11 percent. In recent quarters, the increases were down at 3 to 7 percent. CSCO explains that its lower price and margin items are selling faster than its big buck items. The negative sales patterns, assuming nothing else happens, should become obvious on year to year comparisons around mid-1998. However, and it is a big however. However, CSCO is an acquisition minded company. All sorts of things can happen through acquisitions. During 1997, CSCO had significant expenses for purchased R&D acquired through acquisitions. That had a significant impact on its EPS. Additionally, CSCO has investment income that runs through its income statement. So CSCO's EPS free of this stuff is about $2.05 per share for the latest fiscal year. With this stuff, it is much lower. CSCO has managed to keep its uncluttered EPS growing quarter to quarter and I assume it has the ability to tweak earnings. When all is said and done, who knows what investors will perceive from CSCO's financial reporting. Sales may look bad but EPS may look better. But an acquisition can make sales look beter too. Then there is the significant foreign exposure and their method of selling. But that is another story. Its all in the financials.