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

To: The Phoenix who wrote (12734)	2/28/1998 12:10:00 AM
From: sepku	Read Replies (2) \| Respond to of 77400

Thanks for the detailed explanation on YEELDS. At first glance I mistakenly thought the potential returns were 150% of capital invested after 3 years -- OOPS. Now that would be a great deal! ;o) As long as the Internet is still growing, and the enormous demand for more bandwidth and faster access are increasing, CSCO shall surely do very well over the next 5 years...commanding 50% of all networking revenue does have its perks. So the hypothetical scenario of CSCO going "bust" and crashing can safely be discounted for the most part. I doubt Chambers would commit such a disastrous error which would sink CSCO within a few years. There would have to be some massive shift in technology where routers and switches were rendered obsolete. Providing CSCO retains its dominance for the most part over the next several years, I believe the maximum benefits of the YEELDS (your best-case scenario) would likely be the rewards of this vehicle. Of course, it's probably more likely CSCO common stock performs well in excess of 20% annual returns on its own. Apart from the 5% dividend, I'm not sure I see any advantages over purchasing common stock...only limits on potential. >>>Can you trade the YEELDS and if so how does ownership transfer?<<< According to the Reuters release: The American Stock Exchange (AMEX) on Friday said its began trading five percent Cisco Systems [YEELDS] offered by Lehman Brothers Holdings Inc. One million YEELDS were issued at $66.50, the AMEX said. They trade under the ticker symbol "YCS". So it sounds like I ought to be able to plug the YCS ticker into my real-time quotes and watch it trade like any common stock. I also should be able to call up my broker and buy or sell the YEELDS. Since there is a limited float of 1 million YEELDS, they must be transferrable, otherwise there would be none left to purchase and no need for a ticker and exchange to trade on. Since they were "issued" at a certain price, I would guess this is similar to an IPO, except that the changing value of the YEELDS changes the value of the payout (151% from purchase price). But that doesn't make any sense, because the longer you wait while the date of maturity remains unchanged (2/26/01), the less likely you will receive the maximum benefits of YEELDS' 51% return (not counting dividends) since you are raising the bar of CSCO's performance if the price of the YEELDS appreciates. If the price falls and you purchase the YEELDS, you lower the bar for CSCO's performance within the same period before maturity, and you will underperform the common stock even more. Therefore, there is no real advantage to purchasing the YEELDS at different prices since the maturity date remains constant, and you have a cap on return potential. So now basically it comes down to the YEELDS being very similar to preferred stock -- there being a dividend payed. So what in the world is the incentive to trade these YEELDS rather than CSCO common stock, apart from the dividend (incentive to hold long-term)? Exercising the YEELDS at maturity is a disadvantage considering the real profit potential is in the appreciation of YCS itself, and selling before expiration, thereby avoiding the ceiling. It's clear that YCS will trade in tandem with CSCO common, since the two are linked. If you purchased YCS @ 65, and sold at 113 in 2 years, you would collect 75% in appreciation PLUS the 5% annual dividends. Ok, I'm totally at a loss here...I'm obviously not catching on to something regarding the YEELDS. Style Pts.

To: The Phoenix who wrote (12734)	2/28/1998 12:11:00 AM
From: Gerald Walls	Respond to of 77400

Questions: Can you trade the YEELDS and if so how does ownership transfer? What if they default, how can you collect? Are they insured? Traded on AMEX as YCS. They appear to be issued by Lehman (sp?) and I'd guess they'd be treated as bonds against Lehman in a bankruptcy so you'd be in line with all other creditors, unless they are collateralized with CSCO stock. If I understand correctly collateralized debt gets first shot at the collateral until the debt is covered. I am not a lawyer or an accountant.

To: The Phoenix who wrote (12734)	2/28/1998 12:19:00 AM
From: sepku	Respond to of 77400

Forwarding: ------------------------------------------------------------ YTD performance of selected network stocks through Friday, 2/27/98: Stock 12/31/97 02/27/98 %gain(loss) MADGF 3 7/8 6 1/2 67.7 XYLN 15 1/8 24 1/8 59.5 SHVA 8 9/16 13 5/8 59.1 ASND 24 1/2 37 7/16 52.8 LU 79 7/8 108 3/8 35.7 BAY 25 9/16 33 7/8 32.5 XIRC 10 1/16 12 7/8 28.0 NT 44 1/2 53 5/16 19.8 CSCO 55 3/4 65 7/8 18.2 NWX 277.83 320.40 15.3 TLAB 52 7/8 60 3/8 14.2 FORE 15 1/4 16 1/16 5.3 PAIR 19 3/8 20 1/8 3.9 CS 15 15 1/2 3.3 COMS 34 15/16 35 3/4 2.3 MRVC 23 7/8 23 1/4 ( 2.6) WSTL 12 3/4 12 ( 5.9) CIEN 61 1/8 41 15/16 (31.4) NN 34 7/8 23 1/2 (32.6) c Gary Korn