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

To: desert fox who wrote (11178)	12/23/1997 3:33:00 PM
From: sepku	Read Replies (1) \| Respond to of 77400

>>>Just curious, when it comes to shorts, why Cisco?<<< Over on the ASND thread, we've been keeping close track of the entire networking sector -- including the wannabes like LU and NT. I've been impressed with CSCO's resistance to the sector's troubles since it is perhaps one of the only networkers to still be sitting positive for the year -- I can't think of another. I agree with Craig's excellent post outlining his reasons for his bearish views on CSCO. I have to agree with most of them. There are many other short candidates out there, I know. But CSCO is still standing unscathed despite all the carnage in 1997, and I have a feeling that its dominance in this industry has served as an effective shell against troubles that affect networking as a whole. The slowdown in growth must affect CSCO eventually. At the beginning of the year, consensus was 50% growth. Now it is 30 - 40%, right? I think there's still more room for growth expectations to shrink, and if that occurs lowered estimates for late 1998 Q's should follow, discouraging further investment. If there is little upside currently, then that must mean there is more downside since the stock is near the top of its spectrum. If ANY negative news breaks, CSCO should see some p/e compression. Considering nothing of the sort has surfaced yet, if there's a first time, it will me significant. I ask myself, would I buy CSCO at these levels? Nope. And for all the bullish sentiment from the longs, what I haven't heard is anyone declaring what a value CSCO is and that they just have to buy more. This tells me that even the bulls consider CSCO fairly valued near mid-50. Things look good enough to comfortably hold onto the stock, but not good enough to buy more. This convinces me further, that CSCO is vulnerable to anything negative...all it takes is that one piece of news to rock the boat and make a few institutions take some of their chips off the table. But there really isn't anything out there that could possibly do the reverse -- if anything, leaner times are ahead for the whole industry. CSCO is about to enter a market-share war with ASND in the 1st half of 98...this will draw COMS into the fray. It's already begun in Q4/97 with RAS prices falling fast. I'm guessing CSCO will take any price for its equipment to secure market share, and likewise ASND will sacrifice a few points of margin to counter CSCO's sweet bids. Although RA is not the largest portion of CSCO's revenues, it is significant enough to perhaps impact earnings by a few pennies on Q1 and Q2. If so, a miss from such a stellar performer could be costly to a networker whose investors have already largely forgotten that even CSCO can stumble or commit an error. And that's the most dangerous environment of all. I just feel that the way CSCO trades, even though it manages to keep fighting its way back up, its ranges are biased to the downside. And that's exactly what I need to get in and out with some small profits. It's relatively safe to short too..."unlimited upside" is a poor argument, in my opinion, against short-selling...but even poorer for a stock sitting near its 52wk high and facing a price-war and slowing growth going into 1998. >>>I can only assume that cisco is one of many that you short.<<< Actually, this is my only short. I hardly ever use this tactic, but in this market, my long positions aren't going anywhere. I chose CSCO because I have a better "feel" for the networkers than I do with any other sector in techs. And CSCO is the only tree still standing. >>>I believe Y2K problem will be it's biggest problem<<< That's interesting...I haven't heard that point of view before. How so? Also, I don't know much about the Y2K problem, but I have read some articles that claim that nobody really knows how bad it is going to be until it happens...if it's really that bad at all. How much of it is hype? Style Pts.