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

To: Little Investor who wrote (11162)	12/22/1997 8:55:00 PM
From: craig crawford	Read Replies (2) \| Respond to of 77400

<< Thought you were a Cisco believer, and Cisco still appears on your list of favorite stocks. >> "Believer" is probably too strong of a word. I like the company and I think they are superbly run, yes. If I had to pick one networker to buy and I couldn't touch it for 5 years C$CO would be the one. I would rather make money being long rather than short but emotions shouldn't run my trading decisions. The odds should. << Have the Cisco fundamentals changed in your opinion? >> I believe that they have, or at least the market will perceive that they have. We will have to wait and see if they actually have or not. I think C$CO is priced as if absolutely nothing has changed. << Craig, what are the reasons you are short on CSCO? >> I've been hanging out on the COMS thread lately (an even better short) so there are reasons detailed there. If you don't want to sift through my posts there I will give you a quick summary. (not in any particular order of importance) 1) The market. (especially techs which is mostly all I follow) I think the techs are going lower and C$CO is a tech. 2) C$CO is richly priced. Sure it is a superb company so it deserves a premium to the market and other networkers. I just think the premium is a little too high right now. 3) Insiders have been selling significant amounts of shares since the 40's (split adj) and they have been selling more up here in the 50's. 4) Networking growth is slowing down (especially in the US). A recent report suggested 16% growth. C$CO's PE is twice that. 5) Asian concerns. C$CO has less exposure than some of the other networkers but it is not zero. People can claim all they want, but C$CO isn't totally immune from Japan or Asia. Anyone who tells you otherwise is trying to pull the wool over your eyes. Asia (and Europe) were supposed to be the next huge growth area and were expected to pick up the slack from the maturation that is occuring in the US. I think the Asian contagion will infect Europe and China soon and that will be one more negative. 6) Increasing competition. Lucent has recently demonstrated that they are serious about data networking. Compaq and Intel have done the same thing throwing their hat into the ring. Nortel is expected to follow suit. All these companies are bigger than C$CO. 7) The stock has shown technical weakness. 8) Complacency. Too many people have grown attached to this stock (I don't blame them--up 25,000% in the last 7 years). They think that C$CO can do no wrong. Just about every tech stock in the universe has screwed up at one time or another. (INTC, DELL, MSFT, IBM, CPQ, ORCL for example). I'm not saying it's going to happen this time, but the odds have improved lately with the economic turmoils. 9) Inventory concerns. I know, I know. I've read the stories explaining it as a positive, not a negative. I'm a little more skeptical than most. In most cases when the warning flag pops up it usually ends up being more serious than first believed. I'm not banking on this, but it's a possibility nonetheless. Just to show you how precarious the market is, take a look at how the market reacted after the 10Q came out. The market isn't looking at C$CO through such rosy glasses anymore. 10) Y2K issues. This may not make a serious gouge into C$CO's revenues but it may have an effect. When your dealing with expensively priced stocks every little possible scenario adds up. If it only effects 1% of C$CO's business it will be a big deal. On a company with $8 billion in revenues 1% = $80 million in sales. This could make the difference between just hitting estimates or missing by a penny or two. To summarize: The odds are stacked against C$CO's favor. If all these issues I mentioned turn out to be insignificant I bet C$CO just consolidates and bides it's time, waiting for the next big advance. For this stock to break out above 60 C$CO will have to report good earnings and the martket will have to shrug off the Asian flu. There are just too many things to go wrong.