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

To: Frank Edwards who wrote (17736)	10/5/1998 2:41:00 PM
From: Tulvio Durand	Read Replies (1) \| Respond to of 77400

If I read it correctly, the Parish & Co report may be the true cause of CSCO's drop. It says that it has a $15 Billion obligation to its employees in stock options, and that when considering this and other (potential) liabilities it's market capitalization should be restated at $27 Billion. Using similar reasoning it says MSFT's market cap should be restated at $60 Billion. Check out the excerpt below. biz.yahoo.com <<< Based upon restated earnings and assuming an adjusted valuation given Cisco Systems and Microsoft's strong gross revenue growth and industry leading positions, Parish & Company calculates their expected market capitalization to be approximately $27 billion and $60 billion respectively. This calculation does not include consideration of Cisco Systems current conflict with the SEC over their accounting methods regarding acquisitions. >>> Comments? Tulvio

To: Frank Edwards who wrote (17736)	10/5/1998 2:45:00 PM
From: John F.	Respond to of 77400

All, any thoughts on this article by Parish & Company? I would be interested in some discussion of the following excerpt in particular: Perhaps the current situation is best summarized by Microsoft's CFO in a 9/28/98 interview in Computerworld in which he states, If Microsoft took stock options away, it would have to pay people two to 10 times more to make up the difference. He added that compensation-and how Wall Street continues to inflate Microsoft's valuation-is ''a huge, overarching issue we think about constantly.'' In both cases these models use a highly leveraged strategy that significantly underestimates the financial impact of debt, thereby inflating asset values. Using Cisco Systems recently filed 10K as an example, which can be accessed at www.edgar.com and referring to printed pages 187-189, this ''Black Scholes'' model indicates that the restatement to earnings to account for stock options is roughly $242 million for fiscal 1998. Parish & Company notes in a 9/30/98 press release that based upon footnote disclosure and the market price of the stock on that date, Cisco's outstanding obligation to employees had grown to more than $15 billion. Also noted was that Cisco took a business tax deduction pertaining to the exercise of employee stock options in 1998 for $1.2 billion which is not reflected on its externally published income statement. This amount is unrelated to the future $15 billion obligation. The net effect of the Black Scholes model, in terms of disclosing the aforementioned economic circumstances is a footnote disclosing that after accounting for the options net income would have been $242 million lower. Based upon restated earnings and assuming an adjusted valuation given Cisco Systems and Microsoft's strong gross revenue growth and industry leading positions, Parish & Company calculates their expected market capitalization to be approximately $27 billion and $60 billion respectively. This calculation does not include consideration of Cisco Systems current conflict with the SEC over their accounting methods regarding acquisitions. Based upon this analysis, it is quite clear that technology employees have been used in a widespread interlocking financial pyramid designed to generate assets based management fees that has resulted in destabilizing the global financial system.