Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: jach who wrote (23123)	2/27/1999 3:00:00 PM
From: RetiredNow	Respond to of 77399

The problem with your last post, Jach, is that Lucent only grew their revenues at 8% year over year, last quarter. Whereas, Cisco grew their revenues 40% year over year, last quarter. In addition, Lucent's cash flows worsened last quarter. Lucent also has $20 billion in total debt, half of that long term. There also is overwhelming evidence that Lucent has grown the bottom line mainly from cutting the fat that AT&T accumulated. They can't do that forever. Eventually, they will have to grow organically or through acquisitions. Cutting costs only takes you so far. Cisco has never had cash flow problems. They were profitable in their first year of business. They have always been lean and mean. They only have $1.8 billion in total debt all of that current arising through normal operations. Cisco's results point to revenues actually accelerating. Defying all odds and prediction, their margins remain extremely high. Ergo, Cisco deserves a higher valuation. Just how much higher is up for debate. I think a PE of 60 is about right for Cisco (multiply that times trailing 12 mos earnings of $1.32 and you get $80). However, the market thinks otherwise. The market believes a PE of 72 is what they are worth. BTW, I think a PE of about 35 is more appropriate for Lucent (multiply that by trailing 12 mos of $1.92 and you get $67). So IMHO, Cisco needs to come down $15 or so (but I don't think it will happen) and Lucent needs to come down $34 or so. Which one would you buy right now?