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

To: Arik T.G. who wrote (25493)	5/12/1999 9:36:00 AM
From: Mike M	Respond to of 77400

Good analysis... I agree that they should carry a premium... and would even allow 50x... Still cannot rationalize buying at these levels... It would seem that CSCO's ATM problems and the rise in interest rates will have to take a toll on CSCO's multiples...as great a company as it is. The chart is another concern if it is unable to hurtle the April high of 119...we have potential for technical breakdown. I love this company and can make a case for not taking huge capital gains for the long term investor, but, seems to me, there has to be some pain in here somewhere.

To: Arik T.G. who wrote (25493)	5/12/1999 10:48:00 AM
From: RetiredNow	Read Replies (1) \| Respond to of 77400

Hey Arik, I wish Jach would learn from your posts. At least you give good numbers behind your theories. Jach just spouts nonesense.

To: Arik T.G. who wrote (25493)	5/13/1999 3:38:00 PM
From: John Pitera	Read Replies (1) \| Respond to of 77400

ATG, check out these CSCO #'s breakdown that was emailed to me: Both of these courtesy of Jas Jain Here are the numbers from the latest quarterly earnings report (takes just a 4 function calculator and less than five munites): YoY GROWTH RATES Revenue 44% Operating Expenses 57.7%!!!!!!!!!! Operating Expenses Per Share 50 % Interest and Other Income 73% Operating Earnings Per Share 20.33%! Share dilution rate 5%+ (steady as she goes) So, regardless of what service the financial media and Wall Street analysts provide in analyzing financial reports, NOT one has pointed out the fact that operating expenses continue to grow at much higher rate than the revenue, meaning that the new businesses to boost revenue are not very profitable. To the best of my knowledge no one has pointed this out in plain English. Another, and more important, thing to note is that operating expenses per share are growing at 50% while the operating earnings only at 20%. The additional earnings growth rate is due to "other income" and lower tax rates as a result of paying more "unaccountable expenses" to employees in options exercises. Another fact ignored by the invesuckers in a never-ending 5%+ creeping dilution rate while the company makes more and more other investments, other than in operating business. If anyone wants to understand the full gamut of tools in the arsenal of the financial engineers, just look at opposite strategies employed by Cisco and IBM. The key reason is that IBM has pathetic 3-4% revenue growth rate and hence needs to reduce the number of shares, by borrowing money, to show a better per share earnings results; however, Cisco's P/E is so high that using cash or borrowed money to not dilute shares will reduce earnings per share because of the loss of interest income (on cash and investments) and interest cost (on borrowed money)! Also, if Cisco paid dividends then only the burden of dilution will be felt. Poor long-term shareholders not only receive nothing from the company they lose half their share in the company every 14 years! I admire the patience and the unbounded enthusiasm of the New Era invesuckers. And I am ever so grateful! :-) ------------------------------------------ Here is a snapshot of Cisco's Operating Earnings per Share Growth Rate on a Fiscal Year (ends in July) basis and P/E: Growth in Oper. Income/Share P/E Aug'89-Jul'91 300% 30 Aug'91- Jul'93 100% 40 Aug'93-Jul'95 50% 35 (Low of 15 in Jul'94!!) Aug'95-Jul'97 40% 50 Aug'97-Jul'98 30% 70 Aug'98-Apr'99 20% 100 In keeping with the New Era investment philosophy the P/E is expanding as the operating earnings per share growth rate is in an exponential decline. From Jul'94 low (I was LONG then!) the stock is up by more than 28 fold while operating earning per share is up less than 4 fold -- what an expansion of P/E! Media's proper role is to be a critic of the establishment. Where is the financial media? The conflicts of interests abound as the same people control both the Wall Street and the media.