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

To: Hagar who wrote (19662)	12/2/1998 4:39:00 PM
From: LindyBill	Read Replies (1) \| Respond to of 77400

I don't know anything about the charges, except, as you say, Cisco has not been penalized by Wall Street for them. I think it is interesting that Cisco does these buyouts before they IPO. Stops us from making a killing on them, damn it! If I ran Cisco, I would figure I am buying these companies for nothing but paper. That's the great thing about a company whose stock is growing at the rate of Cisco's. LindyBill

To: Hagar who wrote (19662)	12/4/1998 6:54:00 AM
From: Tulvio Durand	Respond to of 77400

...Has Cisco mastered this? Wall street has come to expect these charges routinely and does not penalize the company for taking them. Do the unencumbered earnings mask the real health of the acquisition? Does consistently doing this allow Cisco to keep the earnings picture smooth and predictable? If this is a "little smoke and mirrors" does the true bill ever come due? Cisco has mastered this and plays it like a fine violin. As long as revenues grow at 30+% clip it is perceived as background noise in a $10 billion business and goes mostly unnoticed. Smaller companies could not escape such scrutiny. But, like you say, it does make earnings a lot more predictable, and most investors (including me) like it that way. Also check out the following reference on the same subject: Message 6661521 Apparently this has gotten SEC's attention. Oh no! Tulvio

To: Hagar who wrote (19662)	12/4/1998 1:30:00 PM
From: Tulvio Durand	Read Replies (1) \| Respond to of 77400

Here is one more article on expensing purchased R&D that has gotten scrutiny from the SEC: fnews.yahoo.com Note in particular, the reference made to Cisco's doing same. ... Capitalizing the R&D is the superior method to use to accurately reflect earnings. Not only does it portray a more realistic picture of the economic earnings of the company, but it also shows on the balance sheet the real amount of invested capital a company uses. Take Cisco Systems (Nasdaq:CSCO - news) for example. Over the last three fiscal years, the company has expensed over $1 billion in purchased R&D. $700 million of that was immediate write-offs and about $300 million looks like amortization. If you add back those immediate write-offs to invested capital, invested capital at the end of fiscal 1998 would be about 10% higher. If you look at the world through the lens of return on invested capital (ROIC), then Cisco's ROIC would be a little bit lower, though still stellar. ... Tulvio